SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17214 / October 31, 2001
UNITED STATES V. FRANK L. HARRIS, III, 4:01CR, USDC, EDTX (Sherman Division)
SECURITIES AND EXCHANGE COMMISSION v. FRANK L. HARRIS, III, (U.S.D.C., Eastern District of Texas, Sherman Division, Civil Action No. CA 4:01CV117)
DALLAS STOCKBROKER SENTENCED FOR DEFRAUDING CUSTOMERS
On October 26, 2001, Judge Paul Brown, United States District Court for the Eastern District of Texas, Sherman Division, sentenced Frank L. Harris, III ("Harris"), a former registered representative of Josephthal & Co., Inc.'s Addison, Texas branch, to serve 46 months in federal prison and to three years of supervised release. Additionally, Judge Brown ordered him to pay restitution of $1,619,847.70. Judge Brown ordered Harris taken into custody immediately.
On June 29, 2001, Harris pleaded to one count of federal securities fraud resulting from a criminal information brought by the U.S. Attorney's Office in which he admitted to stealing funds from 19 customers. From January 2000 until March 2001, Harris diverted money from his customers using three schemes: 1) by falsely representing that their funds would be used to purchase a particular security; 2) by borrowing against securities in the customers' margin accounts without their authorization; and 3) by liquidating their securities without their authorization. Harris' schemes were uncovered when he failed to report to work and fled to Cancun, Mexico.
Harris' plea was based upon the same conduct alleged in the Commission's complaint filed on April 6, 2001 that charged him with violating the antifraud provisions found in Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint sought preliminary and permanent injunctions, disgorgement with prejudgment interest and a civil money penalty against Harris, as well orders for an asset freeze, an accounting, the prohibition of the movement, alteration and destruction of books and records and expedited discovery. In the Commission's action, Judge Brown issued Ex Parte Orders against Harris Freezing Assets, Directing the Repatriation of Funds and Surrender of Passport, Requiring an Accounting, Requiring Preservation of Documents and Authorizing Expedited Discovery. The Commission's action is still pending.