Two convicted felons, Frank R. Hendricks, 54, of Howell, and Ronald C. Heidel, 67, of Sanibel, Florida, have been barred by the Bureau of Securities from the securities industry in New Jersey due to their past criminal history and assessed a $110,000 civil monetary penalty for preying upon unsuspecting investors by selling unregistered securities and making false and misleading statements to investors in connection with the offer and sale of notes to investors. Another individual, Michael J. Reynolds, 59, of Oceanport, also was assessed a $110,000 civil monetary penalty and ordered to cease and desist from further violations of New Jersey's securities laws.
According to the Summary Bar and Penalty Order ("Summary Order") issued by the Bureau of Securities, Hendricks served as office manager and employee supervisor of the Howell office of Dominion Settlement Funding, Inc. ("Dominion"). Dominion is a Wyoming-based corporation founded and operated by Heidel that was engaged in the business of providing pre-settlement funding to litigants. Beginning in January 2013, Dominion issued and sold securities to investors that purportedly were connected to its pre-settlement funding business. As set forth in the Summary Order, Hendricks and Heidel originally met in federal prison. At that time, Hendricks had been convicted of conspiracy to commit mail and wire fraud, substantive wire fraud, and failure to file an income tax return and was serving a 72-month sentence. Heidel had been convicted of making false statements on an income tax return and was serving an 18-month sentence.
Among other things, Dominion, through Hendricks and Heidel, misleadingly represented to potential investors that they would earn an annual return of over 15 percent with "no labor" or "no studying" necessary to earn the investment return. Dominion also misleadingly represented that an investor was "guaranteed to receive [a] return" and that an investment in Dominion was "the safest possible investment you could ever make."
Dominion recruited prospective investors by purchasing lists of industry-specific individuals, known as "leads," from an internet-based advertising company and making "cold calls" of the individuals on those lists. Dominion also hired a direct mail marketing company to mail out advertisements to hundreds of thousands of residents in several New Jersey counties, including Hunterdon County, Monmouth County, Middlesex County, Mercer County, and Somerset County. In these mailings, Dominion fraudulently guaranteed investment returns of 10 percent or 15 percent.
"Dominion and its employees pocketed investors' hard-earned money via lies and deceit," Acting Attorney General John J. Hoffman said. "This isn't a case of an investment gone bad; it's about people who sought to enrich themselves at the expense of investors."
Hendricks and Heidel also failed to disclose their respective criminal records to potential investors when Dominion began offering notes to investors in January 2013. A third individual, Reynolds, working as an "independent sales consultant" with Dominion, similarly sold investments to the public by making numerous fraudulent representations. Hendricks, Heidel, and Reynolds were never registered with the Bureau of Securities as agents and the notes offered to investors through Dominion were also unregistered with the Bureau.
"Dominion and its charged employees promised investors sky-high returns knowing that they couldn't deliver," Acting Consumer Affairs Director Steve Lee said. "Investors need to be skeptical when they are promised 'guaranteed returns' by supposed investment firms whether these promises occur over the phone, internet, or even in coupon packages you receive by mail."
The Bureau of Securities' investigation, with the assistance of the Division of Law, uncovered multiple violations of New Jersey's Uniform Securities Law, including the use of false and misleading statements to investors in addition to the offering and sale of unregistered securities. In addition, the three men acting as agents were not registered.
"The Bureau of Securities is here to assist investors – like these Dominion investors – who are unknowingly taken advantage of and sold investments with promises of extraordinary returns," said Bureau Chief Laura Posner. "We will act to protect investors and bring violators to justice when such actions take place."
Deputy Attorneys General Victoria Manning and Martin Gandelman of the Division of Law represented the Bureau of Securities in the investigation.
Bureau of Securities investigator Richard Stewart handled the investigation for the Bureau.
The Bureau of Securities can be contacted toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600. The public is encouraged to visit the Bureau's web site at NJSecurities.gov.