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MASSACHUSETTS FEDERAL COURT ENTERS JUDGMENT AGAINST CALIFORNIA BASED RELIEF DEFENDANT IN SEC ENFORCEMENT ACTION, ORDERING IT TO PAY OVER $14 MILLION

November 4, 2008 By Paul (Founder, WorkAtHomeTruth) Leave a Comment

From: The U.S. SECURITIES AND EXCHANGE COMMISSION

“Litigation Release No. 20798 / November 3, 2008

Securities and Exchange Commission v. Frank J. Russo et al. (United States District Court for the District of Massachusetts, C.A. No. 06-10984-RGS)

MASSACHUSETTS FEDERAL COURT ENTERS JUDGMENT AGAINST CALIFORNIA BASED RELIEF DEFENDANT IN SEC ENFORCEMENT ACTION, ORDERING IT TO PAY OVER $14 MILLION

The Securities and Exchange Commission announced today that on October 28, 2008, a final judgment by default was entered by the federal court in Boston, Massachusetts, against relief defendant Veritasiti Corporation d/b/a MediaData Corporation (“Veritasiti”) in an enforcement action filed in the United States District Court for the District of Massachusetts. Veritasiti was ordered to pay over $14 million in disgorgement and prejudgment interest.

On June 6, 2006, the Commission filed a complaint alleging that Frank J. Russo, formerly of Wakefield, Massachusetts, operated a fraudulent ponzi scheme through his investment advisory corporation FJR Corporation. Russo, the Commission alleged, raised at least $15 million from at least 160 investors in 12 states to invest in two limited partnerships he controlled: Russo Associates Limited Partnership and Eliot Partners. On June 28, 2006, the Commission filed an amended complaint in the action naming Veritasiti, a California corporation, as a relief defendant based on its receipt of proceeds from the alleged fraud perpetrated by Russo.

The amended complaint alleged that while Russo told investors that their funds were being invested in bonds and other investment securities, and that the investments were safe and conservative, he diverted at least $11.5 million in investor funds to Veritasiti, a corporation that Russo formed with a college acquaintance. The amended complaint further alleged that Russo was Veritasiti=s chief financial officer and that he was one of two directors. According to the amended complaint, Russo did not disclose the purported investment in Veritasiti to investors in the limited partnerships. To the contrary, the amended complaint alleged that he sent false and misleading account statements to investors reporting fictional returns in excess of 10% and making false statements concerning the investment strategies of the limited partnerships. The amended complaint alleged that Veritasiti has no legitimate claim to the funds and that it was unjustly enriched by its receipt of those funds. The amended complaint sought disgorgement of all funds diverted to Veritasiti. The default judgment, entered on October 28, 2008, orders Veritasiti to pay disgorgement of $11.9 million plus prejudgment interest of $2.2 million for a total of $14.1 million.

In a parallel criminal proceeding, Russo pled guilty to federal charges of investment fraud and mail fraud. On February 25, 2008, he was sentenced to 18 years in prison to be followed by 3 years of supervised release and ordered to pay $20 million in restitution and a $500,000 fine. Russo has also been barred by the Commission from any future association with any investment adviser based on his criminal conviction. The Commission’s civil action is still pending against Russo and his entities (FJR Corporation, Russo Associates Limited Partnership, and Eliot Partners).

For further information, see Litigation Release Nos. 19718 (June 6, 2006), 19744 (June 28, 2006), 20103 (May 3, 2007), 20468 (February 27, 2008) and Investment Adviser Release No. 2720 (March 12, 2008).”

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SEC Announces Fiscal 2008 Enforcement Results

October 23, 2008 By Paul (Founder, WorkAtHomeTruth) Leave a Comment

Agency Brings Second-Highest Number of Actions Ever; Significant Increase in Insider Trading and Market Manipulation Cases

FOR IMMEDIATE RELEASE
2008-254

Washington, D.C., Oct. 22, 2008 — The Securities and Exchange Commission today announced that the second-highest number of enforcement actions in agency history took place in fiscal year 2008. For the second year in a row, the SEC also returned more than $1 billion to harmed investors through Fair Fund distributions.

“The SEC’s role in policing the markets and protecting investors has never been more critical,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “The dedicated enforcement staff has been working around the clock to investigate and punish wrongdoing. The staff’s commitment is unwavering year-in and year-out. We look forward to continuing our vital mission of investor protection in the coming year.”

The SEC brought 671 enforcement actions during the just-completed fiscal year, with the number of insider trading and market manipulation cases up more than 25 percent and 45 percent respectively over the previous year. In addition, the SEC has more than 50 ongoing investigations relating to the subprime market.

The Division of Enforcement also reached preliminary settlements in principle with six of the largest firms in the auction rate securities market. Although not included in these FY 2008 enforcement statistics, these settlements, which are subject to final approval by the Commission, would be the largest in the history of the SEC and would return more than $50 billion to investors.

The SEC took a record number of enforcement actions against market manipulation in FY 2008, including charges against a Wall Street short seller for spreading false rumors, and charging 10 insiders or promoters of publicly traded companies who made stock sales in exchange for illegal kickbacks.

Among the major fraud cases brought by the SEC in FY 2008, the SEC sued two Bear Stearns hedge fund managers for fraudulently misleading investors about the financial state of the firm’s two largest hedge funds. The agency also charged five former employees of the City of San Diego for failing to disclose to the investing public buying the city’s municipal bonds that there were funding problems with its pension and retiree health care obligations and those liabilities had placed the city in serious financial jeopardy.

The SEC brought the highest number ever of insider trading cases in FY 2008, including charging former Dow Jones Board Member David Li and three other Hong Kong residents in a $24 million insider trading enforcement action, and charging the former chairman and CEO of a division of Enron Corp. with illegally selling hundreds of thousands of shares of Enron stock based on nonpublic information.

Combating accounting fraud, including illegal stock option backdating, also was a priority for fiscal year 2008. During the year, the SEC charged eight public companies and 27 executives with providing false information to investors based on improper accounting for backdated stock option grants.

Another growth area is cases against U.S. public companies that use corporate funds to bribe foreign officials, an activity precluded by the Foreign Corrupt Practices Act (FCPA). In fiscal year 2008, the SEC filed 15 FCPA cases. Since January 2006, the SEC has brought 38 FCPA enforcement actions — more than were brought in all prior years combined since FCPA became law in 1977.

Additional data on the SEC’s FY 2008 enforcement results will be available as part of the agency’s Performance and Accountability Report, which is scheduled to be published in mid-November.

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http://www.sec.gov/news/press/2008/2008-254.htm

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