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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21257 / October 21, 2009

Advisory Firm Employee Sentenced For Embezzling Over $1.3 Million In Client Funds

United States of America v. Rita White, Case No. 1:06-CR-10424-MLW (D. Mass.)

In the Matter of Veritas Financial Advisors, LLC, et al., Admin. Proc. File No. 3-12355

The Commission announced today that, on October 9, 2009, Rita White, a former employee of former Boston-based investment advisory firm Veritas Advisors, Inc., was sentenced to two years imprisonment, followed by three years of supervised release, and was ordered to pay a fine of $25,000. White also was ordered to pay restitution in the amount of $1,333,340 and to forfeit certain property in the same amount. On May 22, 2007, White pled guilty to three counts of mail fraud in connection with her embezzlement of Veritas client funds.

According to the criminal Information against White, filed on December 26, 2006, Veritas provided investment, bookkeeping, and bill payment services to its clients. White, as a Veritas employee, had access to blank checks for client accounts and was responsible, among other things, for writing and mailing checks drawn on client accounts to pay for clients' day-to-day expenses. Between at least 1999 and March 2005, the Information alleges, White wrote and mailed checks drawn on certain clients' accounts, totaling more than $1.4 million, to pay for her own personal expenses, without the clients' authorization.

White was one of several respondents in a Commission administrative proceeding instituted on July 5, 2006. In the administrative proceeding, the Division of Enforcement made substantially similar factual allegations against White as those contained in the Information. The Division alleged that White's conduct violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. White failed to respond to the Division's allegations, and, on October 11, 2006, an Administrative Law Judge entered an order of default against her. The default order deemed the Division's factual allegations against White to be true, found that she had willfully violated the aforementioned provisions of the Exchange Act, ordered her to cease and desist from committing or causing future violations of these provisions, barred her from associating with any investment adviser, and ordered her to pay disgorgement in the amount of $1,300,000, plus prejudgment interest thereon, and a civil penalty in the amount of $100,000.

The remaining parties to the administrative proceeding — namely, Veritas, an affiliated entity of Veritas known as Veritas Financial Advisors, LLC, and Patrick Cox, the sole principal of both entities — consented to the entry of an order, on December 29, 2006, making certain factual findings, finding that they violated the anti-fraud and various other provisions of the federal securities law, censuring both Veritas entities for their violations, ordering Cox to cease and desist from committing or causing future securities laws violations, revoking Veritas Financial's registration as an investment adviser, barring Cox from associating with any investment adviser, and ordering Cox to pay a civil penalty of $120,000.

For additional information, see Exchange Act Release No. 54098 (July 5, 2006) and associated order, Exchange Act Release No. 54587 (October 11, 2006), and Exchange Act Release No. 55021 (December 29, 2006).

The Commission acknowledges the assistance and cooperation of the Federal Bureau of Investigation and the United States Attorney's Office for the District of Massachusetts.

 

http://www.sec.gov/litigation/litreleases/2009/lr21257.htm


Modified: 10/21/2009