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Litigation Release No. 20103 / May 3, 2007

United States of America v. Frank J. Russo (United States District Court for the District of Massachusetts, Cr.A. No. 07-10127-RCL)

Securities and Exchange Commission v. Frank J. Russo, FJR Corporation, Russo Associates Limited Partnership and Eliot Partners (United States District Court for the District of Massachusetts, C.A. No. 06-10984-MEL)

Massachusetts-Based Investment Adviser Indicted in Federal Court on Charges of Investment Adviser Fraud and Mail Fraud

The Securities and Exchange Commission announced today that, on April 27, 2007, the United States Attorney's Office for the District of Massachusetts announced the indictment of Frank J. Russo, a Wakefield, Massachusetts-based investment adviser on one count of investment adviser fraud and nineteen counts of mail fraud.

The indictment alleges that during the period 1982 through 2006, Russo managed two limited partnership investment vehicles. According to the indictment, Russo represented to investors that they could expect "above average" positive returns and that their investments would be safe, but Russo did not invest his victims' money as promised and lost more than $20 million in investor funds. The indictment further alleges that, to conceal the losses and his misrepresentations, and to lull victims into further investments, Russo generated false account statements that reflected inflated balances and gains that did not exist. According to the indictment, more than 250 individuals were victims of Russo's scheme. The indictment also seeks the criminal forfeiture of at least $20 million and Russo's residence.

The Commission had previously filed an emergency enforcement action against Russo and three related entities on June 6, 2006 in federal district court in Massachusetts alleging violations of the registration and anti-fraud provisions of the securities laws. The Commission obtained, by consent, preliminary injunctions, asset freezes and other relief against Russo and the three entities on that date. On June 28, 2006, the Commission amended its complaint to add Veritasiti Corporation, a California corporation, as a relief defendant based on its receipt of proceeds from the alleged fraud and obtained, by consent, an asset freeze against Veritasiti. The Commission's action is still pending against all parties. In addition, Massachusetts Secretary of State William Francis Galvin=s Securities Division had previously filed an administrative action against Russo on May 25, 2006 alleging violations of state securities laws and imposing a temporary restraining order requiring him to cease all investment advisory activities. That action is still pending.

For further information, see Litigation Release Nos. 19718 (June 6, 2006) and 19744 (June 28, 2006).



Modified: 05/03/2007