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U.S. Securities and Exchange Commission

Litigation Rel. No. 18676 / April 23, 2004

Court Enters Default Judgments Against Defendants in SEC Fraud Case and Orders Them to Pay Over $6 Million

Court Also Releases Over $13 Million to Investors

SEC v. Claude Lefebvre et al. (United States District Court for the Northern District of California, C.A. No. C-02-3704-JSW)

The Commission announced that on April 12, 2004, a San Francisco federal court entered default judgments against Claude Lefebvre and RMO Assets Management SA, both defendants in a fraud action filed by the Commission on July 31, 2002. The Commission alleged in its complaint that Lefebvre, RMO and others participated in a fraudulent offering of securities that raised at least $40 million from investors in July 2002. In the default judgments, the Honorable Jeffrey S. White permanently enjoined Lefebvre and RMO from future violations of the antifraud provisions of the federal securities laws and ordered them to pay over $6 million in disgorgement, prejudgment interest and civil penalties. In addition, on March 31, 2004, the Court released to investors in excess of $13 million in frozen assets that the Commission alleges was fraudulently obtained by Lefebvre, RMO and other defendants. The court had originally frozen the assets in August 2002 at the Commission's request to protect them from dissipation or misappropriation by certain defendants.

The Commission alleged in its complaint that Lefebvre, acting through RMO and another company, falsely promised investors exorbitant returns, such as a 100% return per week, through a fraudulent prime bank trading program. The complaint further alleged that, in the span of several weeks in July 2002, Lefebvre and others spent at least $4 million in investor funds on personal and luxury items such as cars, jewelry, and large hotel bills.

In its order granting the Commission's motion for default judgment against Lefebvre and RMO, the Court found that Lefebvre made intentional misrepresentations to investors by falsely stating that he was federally-licensed to trade financial institution instruments, and by knowingly misappropriating investor funds for his own personal gain. The Court further found that the actions of Lefebvre, as RMO's agent and acting on RMO's behalf, are imputed to and thus impose liability on RMO. For that misconduct, the Court permanently enjoined Lefebvre and RMO from committing further violations of the antifraud provisions of the federal securities laws [Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder]. The Court found that the appropriate disgorgement liability for Lefebvre and RMO is $5,473,487 (plus prejudgment interest), which is equal to the amount of investor funds that was disbursed from an account under the direct control of Lefebvre and RMO. In addition, the Court imposed civil penalties of $250,000 each against Lefebvre and RMO. The case against the remaining defendants (Dennis Herula and Watch Hill Capital Management) and the relief defendant (Mary Lee Capalbo) remains pending.

For further information, please see Litigation Release No. 17759 (October 1, 2002) [civil contempt charges against Lefebvre and RMO Assets Management for violating the court's August 1, 2002 temporary restraining order]; Litigation Release No. 17729 (September 17, 2002) [Lefebvre arrested and charged in parallel criminal action]; and Litigation Release No. 17652 (August 2, 2002) [temporary restraining order and asset freeze against Lefebvre, Herula, and others].

 

http://www.sec.gov/litigation/litreleases/lr18676.htm


Modified: 04/23/2004