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U.S. Securities and Exchange Commission


Litigation Release No. 19545 / January 27, 2006

Securities and Exchange Commission v. Teresa V. Fernandez, 96 Civ. 8702 (S.D.N.Y.)(JES)

Teresa Fernandez Sentenced to 41 Months in Prison for Making False Statements to the SEC and Probation Offices

On January 25, 2006, United States District Judge Denny Chin sentenced Teresa V. Fernandez, 57, of Tenafly, New Jersey, to forty-one months incarceration for making false statements about her financial condition to the Securities and Exchange Commission and to two United States Probation Offices. Fernandez made the false statements to avoid more substantial monetary sanctions in connection with the settlement of a pending Commission civil enforcement action and to avoid payments under a restitution order imposed on her in a parallel criminal proceeding. Following her incarceration, Fernandez will be placed on supervisory release for a period of two years.

On May 19, 2005, Fernandez pleaded guilty to a three-count indictment for making false statements to a government official, in violation of Title 18, United States Code, Section 1001, in US v. Teresa V. Fernandez, 05 Cr. 115 (S.D.N.Y.) (DC) (the "false statements case"). By entering the guilty plea, Fernandez admitted that she underreported her assets to the Commission and the Probation Offices.

Fernandez's false statements to the Commission were made in connection with the 2001 settlement of the Commission's enforcement action against her, SEC v. Fernandez, 96 Civ. 8702 (S.D.N.Y)(JES), arising out of her fraud upon investment advisory clients. Under the terms of that settlement, Fernandez was held liable for disgorgement of $2,844,883, representing her ill-gotten gains from the fraud, but was required to pay only approximately $1,000,000. Payment of additional disgorgement and prejudgment interest was waived by the Commission and no civil penalties were imposed on Fernandez, based on Fernandez's claimed inability to pay, and in particular on representations she made in a declaration of financial condition she submitted to the Commission.

As alleged in Count One of the indictment, Fernandez stated in her declaration of financial condition that since the third quarter of 1983 she had not had any interest in, or control of, accounts at foreign financial institutions (other than several identified accounts, which held de minimis amounts), when in fact, at the time she made those statements - on or about July 31, 2000 - she had an interest in and control of an offshore trust account. (At the time Fernandez signed the declaration, the trust held assets valued at approximately $1.8 million.) Counts Two and Three of the indictment charged Fernandez with concealing the trust account from the United States Office of Probation for the Southern District of New York, which was investigating her ability to pay restitution in the parallel criminal case, U.S. v. Teresa V. Fernandez, 96 Cr. 678 (S.D.N.Y.)(DC), and concealing that account and two others from the United States Office of Probation for the District of New Jersey, which supervised her probation in that case.

The United States Attorney's Office for the Southern District of New York prosecuted the false statements case, as well as the parallel criminal case. Fernandez remains subject to the restitution order entered in the latter case.

For further information, see Litigation Release No. 15159 (November 19, 1996); Release No. IA 1650 (August 21, 1997); Litigation Release No. 16608 (June 26, 2000); Litigation Release No. 16800 (November 15, 2000), and Litigation Release No. 19055 (January 26, 2005).



Modified: 01/27/2006