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U.S. Securities and Exchange Commission


Litigation Release No. 21333 / December 14, 2009


Securities and Exchange Commission v. Frank J. Russo, FJR Corporation, Russo Associates Limited Partnership, Eliot Partners and Veritasiti d/b/a Media Data Corporation, as Relief Defendant, (United States District Court for the District of Massachusetts, C.A. No. 06-10984-RGS)

The Securities and Exchange Commission announced today that on December 11, 2009, the United States District Court for the District of Massachusetts entered final judgments by consent in a previously-filed enforcement action against Frank J. Russo ("Russo"), a Massachusetts-based former investment adviser and his investment advisory corporation, FJR Corporation ("FJR"). The Court also entered an order by default on October 30, 2009, against Russo Associates Limited Partnership ("Russo Associates"), a now defunct limited partnership controlled by Russo. The judgments enjoin Russo, FJR and Russo Associates from future violations of the securities laws. Also, on October 2, 2009, the Commission voluntarily dismissed without prejudice the Commission's case against Eliot Partners ("Eliot Partners"), also defunct, because it had no status as a legal entity and was merely a d/b/a for Russo.

The Commission had filed an emergency enforcement action on June 6, 2006 against Russo, FJR, Russo Associates and Eliot Partners, and obtained a court order freezing Russo's assets and the assets of entities he controlled. The Commission's complaint alleged that Russo and FJR convinced at least 160 investors to invest a total of over $15 million in the purported investment vehicles they controlled, Russo Associates and Eliot Partners. The complaint alleged that Russo mislead investors about the nature of the investments and their expected returns. According to the complaint, Russo also diverted at least $11.5 million in investor funds to Veritasiti Corporation, a private California company which Russo co-founded with a college friend.

On June 28, 2006, the Commission amended its complaint to name Veritasiti as a relief defendant and obtained a court order freezing its assets. On October 30, 2008, the Court entered a default judgment against Veritasiti, ordering the company to pay disgorgement and pre-judgment interest of $14.1 million.

On February 25, 2008, in a parallel criminal proceeding, Russo pled guilty to federal charges of investment fraud and mail fraud. He was sentenced to 18 years in prison to be followed by 3 years of supervised release and ordered to pay $20 million in restitution and a $500,000 fine. Because of those criminal sanctions, the judgments the Commission obtained on December 11, 2009, against Russo and FJR do not include additional monetary relief. The judgments entered against Russo, FJR, and Russo Associates all include injunctions against future violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the judgments against Russo and FJR also include injunctions against violations of Section 206(1) and 206(2) of the Investment Advisers Act of 1940. The judgment against Russo Associates also includes an injunction against violations of Section 7(a) of the Investment Company Act of 1940. Russo, who is currently incarcerated, was also barred by the Commission in March 2008 from any future association with any investment adviser based on his criminal conviction.

The Commission acknowledges Massachusetts Secretary of State William Francis Galvin's Securities Division, which first alerted the Commission to Russo's activities and at the same time imposed a temporary restraining order against Russo on May 25, 2006, requiring him to cease all investment advisory activities.

For further information, see Litigation Release Nos. 19718 (June 6, 2006), 19744 (June 28, 2006), 20103 (May 3, 2007), 20468 (February 27, 2008), 20798 (November 3, 2008) and Investment Adviser Release No. 2720 (March 12, 2008).



Modified: 12/14/2009