Today I realized that I never posted about the case against Steven B. Heinz. Please accept my apologies for this oversight, as this is a story that fits the purposes of this blog perfectly. Heinz solicited his clients at his brokerage firm, Ogilvie Security Advisors Corporation, and used his membership in the Mormon Church to gain trust with investors, many of who were elderly and unsophisticated. One investor, the recent widow who attended church with Heinz, invested after he volunteered to assist her with her finances and investments after her spouse died. Her money is now gone.
Heinz “guaranteed” his investors a fixed rate of return from 6 percent to 120 percent a year, which garnered him nearly $4 million from more than fifteen former clients, family members, and friends. He stated that this money was to be used for the purpose of day-trading futures contracts. Heinz created the appearance of being a successful futures trader, but in reality he lost approximately $1.5 million. Heinz also used investor money to pay “returns” to earlier investors using new investor funds (a classic Ponzi scheme).
On August 8, 2013, the Securities and Exchange Commission (“SEC”) filed a lawsuit against Mr. Heinz and obtained a temporary restraining order and an asset freeze.
Mr. Heinz eventually settled with the SEC and on April 28, 2014, the United States District Court for the District of Utah entered a final judgment against him. Heinz consented to the issuance of the judgment and admitted to all of the material facts the SEC alleged in its Complaint. Specifically, Heinz admitted the following allegations in the SEC’s complaint:
- Beginning in January 2012, Heinz offered and sold investment contracts to more than fifteen investors, raising approximately $4 million for the purported purpose of investing in futures contracts. (SEC Complaint at ¶ 14.)
- Heinz solicited investments from his Ogilvie Securities clients. (SEC Complaint at ¶¶ 14, 17.)
- Heinz told Claimants that his trading strategy was so successful with his personal funds that he was willing to them with their investments too. (SEC Complaint at ¶ 15.)
- Heinz advised Claimants to liquidate some or all of their securities holdings and invest the funds with him. (SEC Complaint at ¶ 16.)
- Heinz promised victims that they would earn tax-free income. (SEC Complaint at ¶ 18.)
- Heinz advised at least one couple to liquidate their investment which caused them to incur $45,000 in penalties. (SEC Complaint at ¶ 20.)
- Heinz provided written investment contracts which specified a guaranteed rate of return. The investment contracts stated the amount invested and the guaranteed rate of return. (SEC Complaint at ¶ 21.)
- Heinz did not prepare a private placement memorandum or financial disclosures with respect to this purported investment. (SEC Complaint at ¶ 22.)
- While Heinz did use a portion of investor funds to purchase futures contracts, bank records show that he misappropriated approximately $1 million in investors’ funds for personal purposes, such as the payment of his personal credit cards in the amount of $331,000, household expenses, personal travel, to fund business opportunities for his children, and to repay a personal loan for $600,000. (SEC Complaint at ¶¶ 30, 31.)
- Heinz also used new investor funds to repay earlier investors their purported profits or return of principal in what is a classic Ponzi scheme. (SEC Complaint at ¶ 35.)
The judgment permanently enjoined Heinz from future violations of the securities laws and requires him to pay disgorgement and prejudgment interest of $3,656,675.84. The judgment also bars Heinz from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization and from participating in any offering of a penny stock. Heinz consented to the issuance of the judgment as is currently working to pay off the huge disgorgement amount. Mr. Heinz was also charged criminally by the U.S. Attorney’s office here in Utah and is currently serving weekends under house arrest.
Many of the victims are seeking compensation through a FINRA arbitration against Heinz’s brokerage firm, Ogilvie Security Advisors Corporation and a number of its principals for failing to supervise him appropriately. Our firm is handling that case.
If you are a victim of this scam feel free to post your experiences in the comments below.