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U.S. Securities and Exchange Commission

U.S. Securities and Exchange Commission

Litigation Rel. No. 18917 / October 4, 2004

Court Enters Default Judgment Against SEC Defendant Robert M. Wachtel and Orders Him to Pay over $16 Million

SEC v. Dennis Herula et al. (United States District Court for the District of Rhode Island, C.A. No. 02 154 ML, filed April 1, 2002)

The Commission announced that on September 15, 2004, a Rhode Island federal court entered a default judgment against Robert M. Wachtel, a defendant in an action filed by the Commission in April 2002. The Commission alleged in its complaint that Wachtel and others participated in a fraudulent offering scheme that raised at least $52 million from investors. In the default judgment, the Court permanently enjoined Wachtel from future violations of the antifraud provisions of the federal securities laws and ordered him to pay approximately $16.6 million in disgorgement, interest and a penalty.

The Commission filed its action against Wachtel and eight other defendants and a relief defendant on April 1, 2002, alleging that Wachtel and others participated in a scheme that made fraudulent representations to investors about a purported high yield trading program. According to the Commission's complaint, the scheme raised approximately $52.75 million from six investors, and was perpetrated by Wachtel and others through entities formerly known as Brite Business S.A. and Brite Business Corporation. The Commission alleged that Wachtel, who held himself out as the U.S. representative of Brite Business, solicited one investor to invest $12.5 million and made misrepresentations to this investor that the rate of return on the investment could be 10% per week. The Commission's complaint alleges that as a result of the misconduct of Wachtel and others, that investors' $12.5 million investment was misappropriated. The Commission's complaint further alleges that Wachtel received approximately $155,000 in Brite Business investor funds.

The Court's final judgment enjoins Wachtel from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, orders him to pay disgorgement in the amount of $12,500,000, plus prejudgment interest in the amount of $4,027,418.32, for a total amount of $16,527,418.32, and assesses a $100,000 civil monetary penalty against him.

For further information, please see Litigation Release Numbers 18212 (July 3, 2003) [default judgment entered against Defendant Johan C. Hertzog]; 18196 (June 20, 2003) [default judgment entered against Defendant Michael Clarke]; 17800 (October 23, 2002) [default judgment entered against Defendant Dennis Herula]; 17957 (January 29, 2003) [default judgment entered against Defendant Mary Lee Capalbo]; 17461 (April 5, 2002) [asset freeze against Wachtel and others].



Modified: 10/04/2004