From the SEC News Digest page:
sec.gov
COMMISSION FILES EMERGENCY CIVIL ACTION AGAINST INTERNATIONAL HERITAGE,INC.
The Commission announced that on March 16 a temporary restraining
order was entered by the United States District Court for the
Northern District of Georgia against International Heritage
Incorporated, a Nevada corporation (Heritage Incorporated), formerly
known as Kara International Inc. (Kara); International Heritage,
Inc. (IHI), a North Carolina corporation; Stanley H. Van Etten (Van
Etten), founder, chairman of the board of directors, president and
chief executive officer of IHI and chairman and CEO of Heritage
Incorporated; Claude W. Savage (Savage), a founder and director of
IHI and a director of Heritage Incorporated; and Larry W. Smith
(Smith), a founder and director of IHI and a director of Heritage
Incorporated. In addition, the Court appointed a receiver for IHI.
The Commission's complaint, filed on March 16, alleges violations of
the antifraud and registration provisions of the federal securities
laws. The complaint also alleges that Heritage Incorporated
violated the reporting provisions by filing a misleading Form 8-K
with the Commission. The Commission is seeking permanent
injunctions for violations of Sections 5(a), 5(c) and 17(a) of the
Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5
thereunder, disgorgement of ill-gotten gains with prejudgment
interest and civil penalties against each defendant.
The Commission's complaint alleges that, beginning in April 1995,
IHI through Van Etten, Savage, Smith and others, has been soliciting
individuals throughout the United States to invest in a pyramid
scheme. IHI raised more than $150 million from over 155,000
investors. The complaint alleges that interests in the program,
which are described by IHI as business centers, are 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.
Finally, on March 6, 1998, IHI consummated a reverse merger with
Heritage Incorporated (formerly Kara), a publicly traded shell
company. The complaint alleges that Heritage Incorporated then
filed a Form 8-K with the Commission which was misleading and
concealed the fact that IHI was operating a pyramid scheme. On
March 13, 1998, the Commission suspended trading in Heritage Inc.
stock.
A hearing on the Commission's motion for preliminary injunction is
scheduled for March 24, 1998. [SEC v. International Heritage, Inc.,
Stanley H. Van Etten, Claude W. Savage, Larry G. Smith and
International Heritage Incorporated, a Nevada corporation, Civil
Action File Nol 1:98-CV-0803-TLS, N.D. Ga.] (LR-15672) |
