UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

LITIGATION RELEASE NO. 17589 /June 27, 2002

   UNITED STATES v. G. MATTHIAS HEINZELMANN, III, No. 302-CR-178-R, USDC,
   NDTX (Dallas Division)

   SECURITIES AND EXCHANGE COMMISSION V. G. MATTHIAS HEINZELMANN, III,
   No. 402-CV-0403-A, USDC, NDTX (Fort Worth Division)

   On June 21, 2002, G. Matthias Heinzelmann, III entered into a plea
   agreement with the United States Attorney for the Northern District of
   Texas (Dallas Division), in which he pleaded guilty to one count of
   conspiracy to make false entries in the books and records of a bank,
   in connection with violations of the federal securities laws that were
   the subject of an earlier-filed Commission action. Heinzelmann faces
   up to five years in prison and a substantial fine.

   The indictment against Heinzelmann alleges, and in the plea agreement
   Heinzelmann has admitted, that he agreed to divert money owed to
   certain customers of Fort Worth, Texas based Surety Bank, N.A. to
   other Surety Bank customers who were indebted to Surety Bank. Surety
   Bank is a wholly-owned subsidiary of Surety Capital Corporation, a
   bank holding company whose securities are registered with the
   Commission. During the relevant period, Surety Capital's common stock
   was traded on the American Stock Exchange. The diversion allowed
   Surety Bank to avoid writing off bad loans, which caused Surety Bank's
   profits to be overstated, and its losses to be understated.

   On April 25, 2002, the Commission filed a civil injunctive action
   against Heinzelmann, of Fort Worth, Texas, seeking a permanent
   injunction, an officer and director bar, and a third-tier civil money
   penalty. According to the Commission's complaint, from 1996 through
   September 1999, Heinzelmann, while president and director of Surety
   Capital, engaged in an elaborate scheme to hide loan losses
   experienced by Surety Bank. The scheme had a material impact on
   financial statements included in Surety Capital's Forms 10-K and 10-Q.
   Specifically, Surety Capital overstated its pre-tax income by 7% in
   1996, and understated its pre-tax losses by 16% in 1997 and 97% in
   1998. Further, Surety Capital failed to file its Form 10-Q for the
   period ending September 30, 1999. Because of the misstatements, Surety
   Capital failed to make and keep books, records and accounts that, in
   reasonable detail, accurately and fairly reflected its transactions
   and dispositions of assets. Surety Capital also failed to maintain an
   adequate system of internal financial controls with respect to the IPF
   Division at Surety Bank.
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