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The following article is reproduced here without permission under the fair use doctrine. Copyright 2004 by The News & Observer Pub. Co.

4th IHI official pleads guilty
Author: From Staff Reports

RALEIGH -- John David Brothers, a founder of Raleigh-based International Heritage Inc., pleaded guilty in federal court Thursday to charges of fraud and lying to federal investigators, Acting U.S. Attorney George E.B. Holding said.

Brothers, 40, of Frisco, Texas, was chief operating officer of IHI, a member of the firm's board and a leading sales recruiter, Holding said. The charges against him focused on the fraudulent sale of private securities by IHI through the use of inaccurate financial statements for 1996, which concealed the true financial condition of IHI from investors.

The prosecutor said Brothers pleaded guilty to one count of conspiracy to commit mail fraud, wire fraud, securities fraud, obstruction of justice, encouraging perjury and making false statements to the U.S. government.

Brothers, three other IHI senior executives and the company's outside public accountant were indicted by a federal grand jury on October 2002 and on March 20, 2003.

IHI was incorporated in North Carolina in April 1995 by Stanley H. Van Etten, Larry G. Smith, and Claude William Savage as a multilevel marketing company purportedly offering exclusive brands of jewelry, recreational equipment and unique collectibles.

Trials are pending for Van Etten, 42, the IHI chief executive officer, president, and founding director, of Lake Drive, Raleigh; and the company's outside accountant, Davin Walter Brown, 49, of Tyson Street, Raleigh.

Brothers is the fourth defendant associated with IHI to plead guilty. The others are Smith, 59, of Greenville, S.C., a founding director; Georgina Mollick, 39, of Raleigh, an attorney for the firm; and Savage, 66, another founder and director.

All are awaiting sentencing.

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