BURST
A B.C. man who was extradited to the U.S. and is serving a prison sentence for his involvement in a $215 million US stock fraud has been banned for life from the province’s investment markets.
The B.C. Securities Commission, the province’s financial market regulator, announced the decision this week, saying a commission panel concluded that Colin Jeffrey Heatherington, 51, is dishonest and lacks integrity, and the “extent and the calculated nature of his misconduct make it clear that only a permanent sanction will be sufficient to protect the public.”
In 2024, a California judge sentenced Heatherington to 3½ years in prison plus two years of probation after he pleaded guilty to conspiracy to commit securities fraud and wire fraud. He was also ordered to pay restitution of US$215 million with another convicted co-conspirator.
Heatherington was involved in a scheme that manipulated penny stock prices to inflate a hedge fund’s reported profits — fraudulent gains that generated millions of dollars in management and performance fees — and caused investors to lose more than $215 million when the funds collapsed.
Heatherington has admitted his role in the scheme run out of Absolute Capital Management Holdings, a Cayman Island-based company that managed eight hedge funds from offices in Mallorca, Spain.
A U.S. criminal case against him and others was launched in 2013. After years of fighting extradition , Heatherington agreed to be handed over to the U.S. in 2021.
According to the U.S. Attorney’s Office, Heatherington was a securities trader who worked closely with the founder and chief investment officer of Absolute Funds, Florian Wilhelm Jürgen Homm, 64, a German financier who was indicted in March 2013 and is currently a fugitive from justice in the U.S.
As part of the scheme, which lasted from 2004 to June 2008, Heatherington oversaw the purchase of billions of shares of U.S.-based penny stocks, which were then traded using various manipulative practices, such as cross trading, which fraudulently inflated the value of the stocks and, in turn, the value of the Absolute Funds.
Heatherington and others in the scheme also reaped millions in profits through self-dealing trades in which they sold their own shares of artificially inflated penny stocks to the Absolute Funds.
Heatherington profited at least US$15 million from the scheme, according to the B.C. Securities Commission.
He used some of that money to buy a home in Canada, U.S. court filings show.
In July 2007, Heatherington purchased a luxury home in Oak Bay, paying $7.74 million in cash for a 9,500-sq.-ft., six-bedroom, nine-bathroom house, according to B.C. Land Title records.
Heatherington sold the house for $6.5 million two years later.
In 2009 and 2010, Heatherington also made several short-term mortgage loans for a property in Vancouver and another in Victoria totalling just under $1.68 million, according to the B.C. property records.
A 2011 Vancouver Sun article noted that Heatherington, who was then facing allegations of his role in the stock fraud, was living a luxurious lifestyle, leasing three luxury vehicles including a fire-engine red 2010 Ferrari 458 Italia, which at the time had a base retail price of $288,000.
Under the B.C. lifetime investment market ban, Heatherington cannot be a director or officer in any company that sells securities to the public, cannot work in a professional capacity in the securities industry such as a stock broker or investment advisor, and can only trade securities for his own personnel accounts.
In sentencing Heatherington, U.S. District Court Judge John A. Kronstadt waived fines and interest on the payback of his share of the $215 million US and kept mandatory payments low because the “defendant has established that he is unable to pay and is not likely to be able to become able to pay any fine.”
The U.S. Attorney’s office noted that after Heatherington returned to B.C. he had pursued a law-abiding life, started a new career as a steel framer, began a stable relationship and cared for elderly members of his family, factors that were taken into consideration in his sentencing.
In a sentencing submission, Heatherington’s lawyer said that any money Heatherington made from the scheme was consumed by support for others and legal fees.
The B.C. Securities Commission also announced this week a 10-year ban for Lorne Stuart Allison from the province’s investment markets.
Allison’s ban resulted from a previous finding by the Canadian Investment Regulatory Organization, a self-regulatory body for the investment industry, that he “deliberately and deceptively” engaged in securities-related business outside of his firm.
With Postmedia files.