Litigation Release No. 19820 / September 5, 2006

Securities and Exchange Commission v. PetroSite Assets, Inc., Masset, Inc., Ivan Dearaujo and Wesley A. Harbison Jr., (Civil Action No. 3:06-CV-1611-N, United States District Court; Northern District of Texas; Dallas Division)

On September 5, 2006, the Securities and Exchange Commission ("Commission") filed a civil injunctive action in United States District Court in Dallas, Texas against PetroSite Assets, Inc. ("PetroSite"), Masset, Inc. ("Masset"), Ivan Dearaujo and Wesley A. Harbison, Jr. In its complaint, the Commission alleges fraud in connection with two securities offerings. The Commission alleges, first, that California-based PetroSite, between August 2002 and July 2005, through its owner Ivan Dearaujo, and salesperson, Wesley Harbison, Jr., fraudulently raised $2.2 million from at least 70 investors nationwide, and, second, that between June and December 2005, Dearaujo and Harbison raised $250,000 through sales of preferred stock issued by Dearaujo's inactive jewelry business, Masset, Inc.

According to the complaint, Dearaujo and Harbison raised the money for PetroSite by offering "participation interests" in the future production revenue of certain oil and gas wells. The Commission alleges that Dearaujo defrauded the PetroSite investors on the "front end" by misappropriating a substantial portion of their funds, instead of investing the money, as promised, in the wells; the Commission further alleges that Dearaujo defrauded the PetroSite investors on the "back end" by diverting for his own benefit much of the revenue generated by the wells. Harbison, according to the complaint, was paid a commission on his sales of the PetroSite participation interests, and participated knowingly in Dearaujo's misrepresentation of those interests. The Commission alleges that Dearaujo and Harbison defrauded the Masset investors by misrepresenting Masset's business prospects and financial stability, and by exaggerating, without basis, the likely future value of Masset stock.

In its complaint, the Commission charges each of the four defendants with violations of the federal securities antifraud provisions, specifically, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Commission is also charging Harbison with violations of Section 15(a) of the Exchange Act for acting as a securities broker without having been registered with the Commission.

The Commission is seeking against each of the defendants a permanent injunction, disgorgement plus prejudgment interest and a civil money penalty, and, in addition, a penny stock bar against Dearaujo and Harbison. The Commission is also seeking against each of the defendants an accounting and an order prohibiting the destruction of records, and, with respect to PetroSite and Masset, the appointment of a receiver to marshal and conserve PetroSite's and Masset's assets for the benefit of the investors.

SEC Complaint in this matter