U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19744 / June 28, 2006
SEC v. Frank J. Russo, FJR Corporation, Russo Associates Limited Partnership, Eliot Partners, and Relief Defendant Veritasiti Corporation d/b/a MediaData Corporation, (United States District Court for the District of Massachusetts, C.A. No. 06-10984-MEL)
SEC Freezes Assets of California Corporation That Received Proceeds of Fraudulent Investment Scheme
The Securities and Exchange Commission announced today that on June 28, 2006, it filed an amended complaint to add Veritasiti Corporation d/b/a MediaData Corporation ("Veritasiti") as a relief defendant in a previously filed enforcement action in federal district court in Massachusetts. Veritasiti has consented to the entry of a preliminary injunction that, among other things, freezes its assets.
The amended complaint names Veritasiti, a California corporation, as a relief defendant based on its receipt of proceeds from the alleged fraud perpetrated by Frank J. Russo, of Wakefield, Massachusetts. The Commission's amended complaint alleges that Russo and his investment advisory corporation, FJR Corporation ("FJR"), raised at least $15 million from at least 160 investors in 12 states to invest in two limited partnerships controlled by Russo: Russo Associates Limited Partnership ("Russo Associates") and Eliot Partners ("Eliot Partners"). The amended complaint alleges that Russo told investors that their funds were being invested in bonds and other investment securities, and that the investments were safe and conservative. However, according to the amended complaint, Russo diverted at least $11.5 million in investor funds to Veritasiti, which Russo formed with a college acquaintance. The amended complaint further alleges 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 complaint alleges 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 alleges that Veritasiti has no legitimate claim to the funds and that it was unjustly enriched by its receipt of those funds. The amended complaint seeks disgorgement of those amounts plus prejudgment interest.
With the consent of Veritasiti, the Honorable Morris E. Lasker issued a preliminary injunction, which among other things, freezes Veritasiti's assets, requires an accounting of assets, and prohibits the alteration or destruction of relevant documents. Veritasiti has not admitted any of the allegations of the amended complaint, except as to jurisdiction.
The Commission acknowledges Massachusetts Secretary of State William Francis Galvin's Securities Division, which first alerted the Commission to Russo's activities and at the same time imposed a temporary restraining order against Russo on May 25, 2006, requiring him to cease all investment advisory activities.
For further information, see Litigation Release No. 19718 (June 6, 2006).