U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20468 / February 27, 2008
United States of America v. Frank J. Russo (United States District Court for the District of Massachusetts, Cr.A. No. 07-10127-WGY)
Securities and Exchange Commission v. Frank J. Russo, FJR Corporation, Russo Associates Limited Partnership and Eliot Partners (United States District Court for the District of Massachusetts, C.A. No. 06-10984-RGS)
Frank J. Russo, Defendant in SEC Enforcement Action, Sentenced in Federal Court on Related Criminal Charges
The Commission announced today that on February 25, 2008, Frank J. Russo, a defendant in a previously-filed Commission enforcement action, was sentenced in U.S. District Court for the District of Massachusetts to 18 years in prison to be followed by 3 years of supervised release. Russo pleaded guilty to charges of investment adviser fraud and mail fraud in a hearing just prior to his sentencing. The criminal charges relate to the investment fraud allegations in the Commission's civil action. The Commission's action was filed in June 2006. Russo was indicted on April 27, 2007.
In addition to his jail sentence, Russo was ordered to pay $20 million in restitution to defrauded investors and to pay a $500,000 fine. The Court ordered forfeiture of Russo's residence and other assets. Russo entered a guilty plea to charges that from 1982 through 2006, he misrepresented to investors that they could expect "above average" positive returns, and that their investments would be safe. In fact, according to prosecutors, he did not invest his victims' money as promised, lost more than $20 million in investor funds, and in order to conceal the losses and his misrepresentations, and to induce victims into further investments, Russo generated false account statements that reflected inflated balances and gains that did not exist.
The Commission had previously filed an emergency enforcement action against Russo and three related entities on June 6, 2006 in U.S. District Court in Massachusetts alleging violations of the registration and anti-fraud provisions of the securities laws. The Commission obtained, by consent, preliminary injunctions, asset freezes and other relief against Russo and the three entities on that date. On June 28, 2006, the Commission amended its complaint to add Veritasiti Corporation, a California corporation, as a relief defendant based on its receipt of proceeds from the alleged fraud and obtained, by consent, an asset freeze against Veritasiti. The Commission's action is still pending against all parties. In addition, Massachusetts Secretary of State William Francis Galvin's Securities Division had previously filed an administrative action against Russo on May 25, 2006 alleging violations of state securities laws and imposing a temporary restraining order requiring him to cease all investment advisory activities.