U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19900 / November 7, 2006
SEC v. Dennis S. Herula et al., (United States District Court for the District of Rhode Island, C.A. No. 02-154-ML)
The Commission announced that on November 6, 2006, a Rhode Island federal court entered a final judgment by consent against Charles W. Sullivan, a defendant who participated in a fraudulent offering scheme that raised at least $52 million from investors. In addition to being permanently enjoined from future violations of the anti-fraud provisions of the federal securities laws, Sullivan was ordered to pay disgorgement, plus prejudgment interest, in the total amount of approximately $1.3 million, and was assessed a $120,000 civil monetary penalty.
The Commission filed its action against Sullivan and eight other defendants and a relief defendant on April 1, 2002, alleging that Sullivan and others participated in a scheme that made fraudulent representations to investors about a purported high yield trading program operated through an entity formerly known as Brite Business Corporation. Among other things, the Commission alleged in its complaint that Sullivan, who incorporated Brite Business and acted as its vice president and general counsel, assisted and supported the establishment of the fraudulent trading program, disbursed certain investor funds through his entity, Commonwealth Management Associates, and took certain investor funds as "loans." In addition, according to the Commission's complaint, Sullivan sent numerous letters to an investor containing misrepresentations concerning the returns the investor could expect to receive and the date when the investor would receive his money back.
Without admitting or denying the allegations in the Commission's complaint, Sullivan consented to a final judgment entered by the Court. The final judgment ordered that Sullivan be permanently enjoined from violating 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; pay disgorgement in the amount of $910,884 (representing profits gained as a result of conduct alleged in the complaint), plus prejudgment interest in the amount of $402,961.38, for a total amount of $1,313,845.38; and pay a civil penalty in the amount of $120,000.
For further information, please see Litigation Release Number 17461 (April 5, 2002) [complaint against Sullivan and others].