Litigation Release No. 17529 / May 22, 2002
United States v. Steven Hevell, Criminal Action No. SACR 01-72 (C.D. Cal.)(AHS)
The Securities and Exchange Commission announced that on May 14, 2002, a federal judge in Santa Ana, California sentenced a Corona Del Mar man to 84 months in federal prison and ordered him to pay $8,669,724 in restitution arising out of a securities fraud scheme. Steven Hevell, 38, pleaded guilty to three counts of mail fraud derived from a Ponzi scheme that defrauded 350 victims out of nearly $8.7 million. The Honorable Alicemarie H. Stotler of the U.S. District Court for the Central District of California imposed the sentence on Hevell, commenting that his companies were "a fairly straightforward Ponzi scheme."
Hevell defrauded his victims using three companies-MicroWest Industries, Inc., Advanced I.D. Technology and Consolidated Imaging Centers Radiology Network. During the period from 1994 to 1997, Hevell sold investments in these high-technology companies by falsely promising that the companies would have substantial revenues from selling software that electronically transmitted radiological images over telephone lines. Hevell promised his investors an annual interest return of 14 to 17.5 percent. The companies actually had no revenues and Hevell used new investor dollars to pay interest owed to previous investors, a classic Ponzi scheme. The interest payments led investors to believe that the companies were profitable and caused investors to make additional investments. Eventually, Hevell stopped making the interest payments and converted the investors' interests into worthless company stock.
Hevell had earlier settled a civil action brought by the Commission by consenting to the entry of a permanent injunction and specified disgorgement. In the Commission's case, the District Court enjoined Hevell from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Court also ordered Hevell to disgorge the sum of $400,000 with a waiver of all but $30,000 based upon financial statements submitted by Hevell.