UNITED STATES SECURITIES AND EXCHANGE COMMISSION Litigation Release No. 15483 / September 10, 1997 SECURITIES AND EXCHANGE COMMISSION v. MARK A. RITACCO, ET AL., United States District Court for the District of Oregon, Civil Action No. CV '97- 1307 ST. SEC Sues Oregon Investment Adviser The Securities and Exchange Commission today accused a Lake Oswego, Oregon investment adviser and former stockbroker of defrauding investors in Oregon, Washington and Utah out of more than $1.8 million between 1992 and 1995. The Commission today sued Mark A. Ritacco, age 36, in United States District Court in Portland. Ritacco ran an investment advisory business known as Integrated Wealth Management, Inc., with offices in Newport and Portland, through which he raised money from investors. Integrated is currently known as Oregon Financial Services. The complaint alleges that from 1992 to 1993, Ritacco raised $1.6 million from investors by selling high-risk promissory notes that he falsely described as being "guaranteed" and "probably safer than a money market fund." In reality, according to the complaint, the notes were issued by a series of high risk, start-up companies, which later were unable to repay the debts. The complaint also alleges that from 1993 to 1995 Ritacco improperly diverted approximately $248,600 in proceeds from securities sales on behalf of three companies that he controlled to a fourth company that he also controlled. The complaint names as defendants Ritacco and two of his companies, Metro Property Development, Inc., and Pacific Property Development, Inc. The complaint also names as a relief defendant Pacific Northwest Housing, Inc., of Vancouver, Washington, an unaffiliated real estate development company that received certain loans from Ritacco's companies. Ritacco has reached a settlement with the Commission in which he consented to the entry of a permanent injunction prohibiting him and his two companies from future violations of the federal securities laws. The settlement also requires Ritacco and his companies to repay more than $315,000, which represents all funds that are recoverable at this time. These payments will be made by relief defendant Pacific Northwest Housing, which consented to an order directing it to repay certain loans from Ritacco's companies over time into a fund for eventual distribution to investors. In the settlement, Ritacco and his companies neither admitted nor denied the allegations in the complaint. According to the complaint, in May 1992 Ritacco began selling high risk promissory notes issued by a series of companies including Immcon, Inc., and Pilot Marketing, Inc., both of Spokane, Washington, and JJJ Electronics, Inc., of Utah. At the time, Ritacco was employed as a stockbroker by Laney & Company. Laney fired Ritacco in September 1992 for selling the high risk notes ======END OF PAGE 1====== - 2 - without the firm's approval. After leaving Laney, Ritacco worked through Integrated Wealth Management, the investment advisory firm he owned, where he continued to sell the high risk notes to his advisory clients through March 1993. In total, Ritacco sold approximately $1.6 million in promissory notes to 45 clients by falsely claiming that the investments were safe, insured or bonded and failing to disclose that the companies issuing the notes were in fact high risk, start-up ventures. Immcon, JJJ Electronics and Pilot Marketing have each since failed to repay the notes and have been dissolved. In a separate scheme, the complaint alleges that beginning in June 1993 Ritacco sold approximately $582,350 in promissory notes on behalf of three companies he controlled: Metro; Pacific; and American Capital Holdings. Ritacco told investors that the proceeds of these notes would be used primarily to make loans to Pacific Northwest Housing, the unaffiliated real estate development company, and that the loans would be secured by residential real estate. In fact, Ritacco diverted approximately $248,600 of these funds to another company he controlled. That company, Secure Concepts, failed in its efforts to develop and market an automobile anti- theft device and currently has no ongoing operations. Ritacco's settlement with the Commission, which currently awaits approval by the federal district court, calls for entry of an order: (1) enjoining Ritacco, Metro and Pacific from future violations of Section 17(a) of the Securities Act of 1933; Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (2) enjoining Ritacco from future violations of Sections 204, 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rules 204-1(b)(1) and 206(4)-4 thereunder; and (3) requiring Ritacco, Metro and Pacific to disgorge their illegal profits of $248,600 plus prejudgment interest of $66,613, or a total of $315,213. Disgorgement and prejudgment interest will come from Pacific Northwest Housing's repayment of loans it received from Metro and Pacific. The Commission also announced that following entry of a final judgment by the federal district court, it will begin separate administrative proceedings against Ritacco and his advisory firm, Integrated Wealth Management. As part of the settlement, Ritacco has consented to the issuance of an order in the administrative proceedings revoking Integrated's registration as an investment adviser and barring Ritacco from participating in the securities industry. ======END OF PAGE 2======