U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19876 / October 18, 2006
Securities and Exchange Commission v. Timothy R. Heyman et al., (U.S.D.C. N.D. AL., Case Number CV-04-CO-0686-S, filed April 5, 2004)
The Securities and Exchange Commission announced that on September 20, 2006, the Commission obtained an order from the United States District Court for the Northern District of Alabama requiring Timothy R. Heyman ("Heyman") and Heyman International, Inc. ("Heyman International") to pay in disgorgement and civil penalties in connection with their perpetration of a Ponzi scheme which defrauded approximately 250 investors of nearly $12 million. Specifically, Heyman and Heyman International are ordered to pay, jointly and severally, disgorgement of $3,616,993, plus $824,012 in prejudgment interest, for a total of $4,441,005 and for Heyman and Heyman International to pay civil penalties of $120,000 and $600,000, respectively. The $3,616,993 that Heyman and Heyman International were ordered to pay represents the amount of investor funds that they did not return to investors during their scheme. Previously, on August 9, 2005, the Court entered an order of permanent injunction against Heyman and Heyman International, enjoining them from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Heyman and Heyman International consented to the entry of the order of permanent injunction without admitting or denying the allegations in the Commission's Complaint.
The Commission's Complaint, filed on April 5, 2004, alleged that Heyman raised the funds from investors through the unregistered offer and sale of securities he called "Depository Agreements" issued by Heyman International. Heyman represented to investors that as a result of investments that he made, investors would earn a minimum of 10% per month on their fully refundable principal investment. The Commission's Complaint alleged that, in reality, Heyman operated a Ponzi scheme by using investor funds to pay previous investors their monthly returns and to make purchases for himself, including several luxury cars and lavish trips. The Complaint further alleges that Heyman invested at most a de minimus amount of investor funds and that Heyman International never had sufficient funds in its bank accounts to repay investors as Heyman represented. The Commission's action against the remaining defendants, Paul D. Carter, American Financial Business, LLC and The Carter Group, Inc., is ongoing.
For additional information, see [Litigation Release No. 18659]