SECURITIES AND EXCHANGE COMMISSION

LITIGATION RELEASE No. 17325 / January 16, 2002

SECURITIES AND EXCHANGE COMMISSION v. DENNIS S. HERULA (United States District Court for the District of Rhode Island, Misc No. 2-008ML)

The Securities and Exchange Commission today announced that, on January 14, 2002, it filed an action to enforce a "forthwith" subpoena against Dennis S. Herula, a former broker at the Cranston, Rhode Island branch of Raymond James Financial Services, Inc. The Commission served the subpoena on Herula at the San Francisco Airport on January 9, 2002, requiring him to immediately turn over financial account records and other documents he was carrying into the U.S. from Bermuda. When served with the subpoena, however, Herula refused to comply, claiming he did not have any such documents in his possession. The Commission alleges in its papers that, contrary to his representations, Herula did have responsive financial account records with him when he was served with the subpoena. Accordingly, the Commission filed its Application for an Order to Show Cause and For an Order Requiring Compliance with Administrative Subpoena Against Dennis S. Herula. The action was filed in Rhode Island federal district court.

In its Application and supporting papers, the Commission alleges that, on December 26, 2001, the Commission issued an Order Directing Private Investigation and Designating Officers to Take Testimony ("Formal Order") in the matter of Brite Business Corporation. The Formal Order authorizes the staff to conduct an investigation into whether Brite Business or others violated the federal securities laws in connection with the solicitation of investments, and whether investor funds subsequently were misappropriated. According to the Commission, Herula, who was terminated by Raymond James in January 2001, served as the broker for at least two Raymond James accounts that may have held millions of dollars in investor funds raised by Brite Business. The Commission staff has been investigating Herula's activities to determine, among other things, what happened to Brite Business investor funds.

The Commission alleges that Herula was arrested in Bermuda in December 2001 after he purportedly submitted false documents to a Bermuda bank in connection with an attempt to transfer $10 million from banks in Europe and South America. When Herula was arrested, the Bermuda police seized from him two laptop computers and numerous documents. According to the Commission, the Bermuda police confirmed that the documents and laptops they seized contained financial account information that would have been responsive to the Commission's January 9 subpoena. Herula subsequently pled guilty to the offense of "uttering a forged document" and was given a one month prison sentence in Bermuda. According to the Commission, upon Herula's release from jail on January 9, 2002, the Bermuda Police returned to him the documents and laptops they had seized, and Herula subsequently boarded a flight to the United States carrying the materials with him. The Commission alleges that, when Herula arrived at his final destination in San Francisco on the evening of January 9, he was carrying a black bag similar to the one that had contained the laptops earlier that day. According to the Commission, the Bermuda police also confirmed that there was enough room in the black bag for Herula tohave fit the documents that were returned to him as well. Despite this evidence, the Commission alleges that Herula claimed, first to the process server and subsequently to the Commission staff in a telephone call the next day, that he did not have any responsive materials in his possession when he was served with the subpoena. According to the Commission, Herula told the process server that the documents were in Boston, and then contradicted himself the next day when he told the Commission staff the documents were in Rhode Island.

Pursuant to its Application, the Commission is seeking an order directing Herula to show cause why the Court should not enter an order requiring Herula to comply with the Commission's subpoena for documents, and an order compelling Herula to immediately produce the subpoenaed documents.