Securities and Exchange Commission
LITIGATION RELEASE No. 17334 / January 24, 2002
SECURITIES AND EXCHANGE COMMISSION v. MARY LEE CAPALBO
(United States District Court for the District of Rhode Island, Misc No. 02-010-ML)
The Securities and Exchange Commission today announced that, on January 18, 2002, it filed an action to enforce a subpoena against Mary Lee Capalbo, a Rhode Island attorney. The Commission issued the subpoena on December 26, 2001, requiring Capalbo to appear for testimony at the Commission's Boston District Office on December 31. According to the Commission, although Capalbo was personally served with the subpoena on December 29, she failed to appear on December 31 and also refused to testify on January 16, 2002, a new date requested by her attorney. Accordingly, the Commission filed its Application for an Order to Show Cause and For an Order Requiring Compliance with Administrative Subpoena Against Mary Lee Capalbo. The action was filed in federal district court in Rhode Island.
In its Application and supporting papers, the Commission alleges that, on December 26, 2001, the Commission issued an Order Directing Private Investigation and Designating Officers to Take Testimony ("Formal Order") in the matter of Brite Business Corporation. The Formal Order authorizes the staff to conduct an investigation into whether Brite Business or others violated the federal securities laws in connection with the solicitation of investments, and whether investor funds subsequently were misappropriated. According to the Commission, Brite Business maintained millions of dollars in investor funds in brokerage accounts at the Cranston, Rhode Island branch of Raymond James Financial Services, Inc. Capalbo's husband, Dennis Herula, served as the broker for at least two of those accounts. The Commission alleges that approximately $15 million was transferred from the Brite Business accounts to an account held in Capalbo's name.
The Commission alleges in its papers that, shortly after Capalbo failed to appear for testimony on December 31, Capalbo's attorney contacted the Commission staff and requested that her testimony be rescheduled to January 16, 2002. He further requested that the staff take Capalbo's testimony in San Francisco instead of Boston. The staff agreed to these requests to accommodate his schedule. On January 15, 2002, less than 18 hours before testimony was to begin, and after a staff attorney had traveled from Boston to San Francisco to take Capalbo's testimony, Capalbo's counsel informed the staff that Capalbo would neither testify nor assert a valid privilege the following day because she needed more time to prepare. Although Capalbo appeared with her counsel the next day, she refused to testify or assert any privilege.
Pursuant to its Application, the Commission is seeking an order directing Capalbo to show cause why the Court should not enter an order requiring her to comply with the Commission's subpoena for testimony, and an order compelling her to appear for testimony at the Commission's Boston District Office. Capalbo's husband, Dennis Herula, is also the subject of a subpoena enforcement action filed by the Commission in Rhode Island federal district court on January 14, 2002, concerning his failure to produce documents in response to a "forthwith" subpoena in this investigation. [SEC v. Herula, Litigation Rel. No. 17325 (January 16, 2002)].