Securities and Exchange Commission
Litigation Release No. 16330 / October 7, 1999
Federal Judge Permanently Enjoins International Heritage, Inc.,
Heritage, Incorporated, and Stanley H. Van Etten
Securities and Exchange Commission v. International Heritage, Inc., Stanley H. Van Etten, Claude W. Savage, Larry G. Smith, and International Heritage, Incorporated. Civil Action No. 1:98-0803-CV-RWS (NDGA September 20, 1999)
The Securities and Exchange Commission announced today that the Honorable Richard W. Story, United States District Judge for the Northern District of Georgia, entered a Consent Final Judgment of Permanent Injunction as to Defendants International Heritage, Inc.("IHI"), International Heritage, Incorporated ("IHI Incorporated"), and Stanley H. Van Etten ("Van Etten"). IHI was enjoined from further violations of Sections 5(a) , 5(c) and 17(a) of the Securities Act of 1933 ("Securities Act"), and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder; IHI Incorporated was enjoined from further violations of Section 10(b) and 15(d) of the Exchange Act and Rules 10b-5 and 15d-11 thereunder; and Van Etten was enjoined from further violations of Sections 5(a), 5(c), and 17(a) of the Securities Act , and Sections 10(b) and 15(d) of the Exchange Act and Rules 10b-5 and 15d-1 thereunder.
The Court ordered disgorgement against IHI in the amount of $6,533,179, of which $4.1 million may be satisfied from a posted surety bond. The Court ordered disgorgement against Van Etten in the amount of $7,630,450, but due to a demonstrated inability to pay, the Court ordered Van Etten to pay $150,000, required Van Etten to waive certain claims against the bankruptcy
estate of IHI, and waived payment of the remaining disgorgement, pre-judgment and post-judgment interest. IHI, IHI Incorporated, and Van Etten consented to the entries of the judgments without admitting or denying any of the allegations of the Commission's complaints. The Court made specific provisions for the distributions of disgorgement funds. The Court did not impose civil penalties against IHI, IHI Incorporated, or Van Etten based upon their demonstrated inability to pay.
The Commission's complaint, filed on March 16, 1998, alleged that beginning in April, 1995, IHI , a North Carolina corporation, through Van Etten and others, solicited individuals throughout the United States to invest in a pyramid scheme through misleading promotional materials, meetings, videotapes, internet web pages, and national conference calls to increase investor interest. IHI raised more than $150 million from over 155,000 investors. The complaint alleged that interests in the program, which were described by IHI as business centers, were securities. In addition to selling interests in the pyramid scheme, between July 17, 1997 and November 1, 1997, the defendants sold $5 million in notes convertible into shares of IHI common stock. The defendants knowingly misrepresented IHI's financial condition to investors and concealed the fact that IHI was operating a pyramid scheme. Van Etten was a founder and director of IHI.
Investors are advised to read the SEC's "Cyberspace" Alert before purchasing any investment promoted on the Internet. The free publication, which alerts investors to the telltale signs of online investment fraud, is available on the Investor Assistance and Complaints link of the SEC's Home Page on the World Wide Web www.sec.gov. It can also be obtained by calling 800-SEC-0330. Investors are encouraged to report suspicious Internet offerings (or other suspicious offerings) via e-mail to email@example.com. A user-friendly form to assist you in making a report is available at the Enforcement Complaint Center on the Enforcement Division link of the SEC Home Page www.sec.gov. Investors can also mail a report to the SEC's Enforcement Complaint Center, Mail Stop 8-4, 450 Fifth Street, Washington, D.C. 20549.
See also: L.R. 15672 (March 17, 1998); L.R.16264 (August 26, 1999)