United States Securities and Exchange Commission
Litigation Release No. 17729 / September 17, 2002
United States of America v. Claude Lefebvre (Case No. 02-12112M (USDC., D.CO))
Defendant in SEC Matter Charged by U.S. Attorney and Detained in Connection with $40 Million Prime Bank Scheme
The Commission announced today that, on September 10, 2002, a U.S. magistrate in Los Angeles ordered Claude Lefebvre held without bail in connection with criminal fraud charges filed against him by the U.S. Attorney's Office in Colorado. The criminal complaint, unsealed after Lefebvre's August 30 arrest, charges that Lefebvre fraudulently obtained $40 million from investors by promising them exorbitant returns through a trading program. The criminal charges come on the heels of a civil fraud case the Commission filed against Lefebvre, a Canadian citizen, on July 31 in connection with the same conduct. In that case, the San Francisco federal court granted the Commission's request for emergency relief against Lefebvre and others, and issued an order freezing over $36 million in funds they received from investors.
The criminal complaint alleges that Lefebvre raised $40 million from investors by promising, among other things, that their money would generate profits of at least 75% per week. According to the criminal complaint, Lefebvre told investors he would generate the profits by trading financial institution instruments rated AA or better. The criminal complaint alleges that Lefebvre made these representations in writing on behalf of himself and another entity, RMO Assets Management SA. According to the criminal complaint, Lefebvre also told investors that he was federally licensed to trade bonds and that he would conduct some of his trading activities through another entity, Watch Hill Capital Management, LLC. The criminal complaint alleges that, after raising money through this scheme, Lefebvre transferred a significant amount of those funds to accounts in his control and in the control of his associates, Dennis Herula and Herula's wife, Mary Lee Capalbo. According to the criminal complaint, millions of dollars in investor funds were transferred from those accounts to individuals, credit card companies and merchandise stores, such as Saks Fifth Avenue and Ben Jewelry.
In the Commission's earlier, related enforcement action, the Commission named Lefebvre, Herula, RMO Assets Management and Watch Hill Capital Management as defendants, alleging that they violated the antifraud provisions of the federal securities laws in connection with the scheme described above. The Commission named Capalbo as a relief defendant in that action. On August 1, 2002, the United States District Court for the Northern District of California entered Temporary Restraining Orders against Lefebvre, Herula, RMO and Watch Hill, temporarily restraining them from violating 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. The Court also froze the assets of all the defendants, including Capalbo. The Court ordered the TROs and asset freezes to remain in effect until October 1, 2002, at which time a hearing on the Commission's Motion for Preliminary Injunction is scheduled.
Lefebvre currently remains in custody in Los Angeles and will be transferred to a facility in Colorado during the pendency of the criminal case.