UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Litigation Rel. No. 18082 / April 10, 2003
Commission Files Civil Contempt Charges Against Dennis Herula
SEC v. Dennis Herula et al. (United States District Court for the District of Rhode Island, C.A. No. 02 154 ML)
The Commission announced that, on April 9, 2003, it filed civil contempt charges against Dennis Herula and Mary Lee Capalbo alleging that they violated federal court orders issued in a civil fraud case filed by the Commission. In its complaint, filed April 1, 2002, the Commission alleged that Herula, a former Raymond James broker, his wife Capalbo, a Rhode Island attorney, and others participated in a fraudulent scheme that raised at least $52 million from investors between 1999 and 2001. The Rhode Island federal court issued a written order on May 8, 2002, imposing preliminary injunctions and asset freezes against Herula, Capalbo and others. The court also ordered Herula and Capalbo to submit written financial accountings to the Commission staff.
In its contempt application as to Herula, the Commission alleges that Herula has recently spent thousands of dollars in violation of the court-imposed asset freeze against him, including over $10,000 for an apparent car purchase in December 2002, over $7,000 in ATM withdrawals, and over $10,000 in checks and bill payments in January 2003. Further, the Commission's application alleges that Herula has maintained several financial institution accounts with balances of tens of thousands of dollars that he failed to identify to the Commission staff in his court-ordered accounting. In its contempt application as to Capalbo, the Commission alleges that $50,000 was transferred in October 2002 from credit card accounts in Capalbo's name to a law firm representing Herula and Capalbo. The Commission alleges that Capalbo did not follow the specific procedures ordered by the court in the preliminary injunction for use of funds to pay attorneys' fees. Further, the court-ordered accountings submitted by Herula and Capalbo did not identify these transfers or the existence of the accounts from which the transfers were made.
For further information, please see Litigation Release Numbers 17957 (January 29, 2003) [final judgment against Capalbo]; 17800 (October 23, 2002) [final judgment against Herula]; and 17514 (May 13, 2002) [preliminary injunction and asset freeze].