U.S. Securities and Exchange Commission
Litigation Release No. 18213 / July 3, 2003
United States of America v. Claude Lefebvre et al. (Criminal Case No. 02-CR-485-RB (USDC., D.CO))
SEC Defendant Arrested and Held Without Bail in Connection with Parallel Criminal Charges by the Colorado U.S. Attorney's Office
The Commission announced today that, on May 29, 2003, federal agents arrested former broker Dennis Herula in Boston, where he was staying under an assumed name. Herula, who is a defendant in two separate civil enforcement actions that the Commission has filed within the past 15 months, was arrested on a warrant in connection with a criminal indictment obtained by the U.S. Attorney's Office in Colorado. The indictment, which was entered on January 30, 2003 and unsealed on April 11, 2003, charges that Herula participated in a fraudulent $40 million investment scheme. On June 19, 2003 a federal magistrate ruled Herula a flight risk and ordered him held without bail pending the final resolution of the criminal case.
The criminal indictment comes on the heels of two civil fraud actions the Commission filed against Herula and others. The first action filed on April 1, 2002 in federal court in Rhode Island resulted in Herula being permanently enjoined from future violations of the antifraud provisions of the federal securities laws in October 2002 and ordered to pay approximately $19 million in disgorgement, prejudgment interest and a civil monetary penalty. As part of that action, in April 2002, the federal court in Rhode Island froze Herula's assets and preliminarily enjoined him from future violations of the antifraud provisions of the federal securities laws. The Commission filed a second civil injunctive action against Herula and others on July 31, 2002 in federal court in San Francisco, alleging that Herula and others participated in another scheme to defraud investors out of $40 million. In that case, the San Francisco federal court granted the Commission's request for emergency relief against Herula and others, and issued an order freezing over $36 million in funds they received from investors. That enforcement action is still pending in California.
According to the indictment, approximately three months after the Commission obtained an asset freeze and preliminary injunction against Herula in the first civil injunctive action, Herula participated in the second fraudulent scheme that solicited $40 million from investors, by promising exorbitant returns on their investment. The indictment alleges that as part of the second scheme, Herula failed to disclose to the investors that the Commission had obtained an asset freeze and preliminary injunction against him. The indictment also alleges that millions of dollars of investor funds were transferred without authorization to accounts in Herula's control and to accounts in the control of Herula's wife, Mary Lee Capalbo, and co-defendant, Claude Lefebvre.
Also, in January 2003, the U.S. Bankruptcy Court in Providence issued a separate warrant for Herula's arrest based on his failure to participate in a bankruptcy proceeding he commenced after entry of the $19 million judgment in Rhode Island. On May 29, 2003, a U.S. magistrate in Providence ordered Herula held in custody for transfer to the District of Colorado to face charges there. Prior to transferring Herula to Colorado to face criminal charges, federal agents escorted Herula to Rhode Island bankruptcy court, where he asserted his Fifth Amendment rights against self-incrimination in response to all questions. On June 19, 2003, Herula was arraigned in the District of Colorado and a U.S. magistrate, finding that Herula was a flight risk, ordered him detained pending the final resolution of the case.
For further information, please see Litigation Release Numbers 17600 (October 23, 2002), 17793 (October 18, 2002) and 17514 (May 13, 2002).