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U.S. Securities and Exchange Commission


LITIGATION RELEASE NO. 17387 / February 28, 2002

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)


On February 13, 2002, the Honorable Paul N. Brown, U.S. District Judge, Eastern District of Texas, entered a Final Judgment as to Frank L. Harris III, a former registered representative of Josephthal & Co., Inc.'s Addison, Texas branch office, permanently enjoining him from committing future violations of Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder. Previously, on June 29, 2001, Harris pleaded guilty to one count of federal securities fraud resulting from a criminal information brought by the United States Attorney's Office in which he admitted to stealing funds from 19 his brokerage customers. Because of the related criminal proceedings, in which Harris was imprisoned for a term of 46 months and ordered to pay restitution in the amount of $1,619,847, the Commission accepted Harris' consent to the order of permanent injunction and dismissed claims for disgorgement, prejudgment interest and penalties. In addition, the Commission announced the institution and simultaneous settlement of public administrative proceedings against Harris in which he agreed to the entry of an Order barring him from association with any broker or dealer for his willful violations of the antifraud provisions of the federal securities laws and the entry of the injunction against him.

The Commission's Complaint charged that from January 2000 until March 2001, Harris diverted money from his customers using three schemes: 1) falsely representing that customer funds would be used to purchase a particular security; 2) borrowing against securities in the customer margin accounts without customer authorization; and 3) liquidating customer securities without their authorization. Harris' schemes were uncovered when he failed to report to work and fled to Cancun, Mexico. Harris later returned to the United States, was apprehended and faced criminal charges.


Modified: 03/01/2002