SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 17092 / August 6, 2001

SEC V. DANA C. GIACCHETTO AND THE CASSANDRA GROUP, INC., 00 CIV. 2502 (LTS) (S.D.N.Y.)

SEC OBTAINS FINAL JUDGMENTS IN FEDERAL COURT ACTION AGAINST DANA C. GIACCHETTO AND THE CASSANDRA GROUP, INC. AND SEC BARS GIACCHETTO AND REVOKES CASSANDRA'S REGISTRATION IN RELATED ADMINISTRATIVE PROCEEDINGS

The Securities and Exchange Commission announces the resolution of all claims against defendants Dana C. Giacchetto ("Giacchetto") and The Cassandra Group, Inc. ("Cassandra") in the civil injunctive action SEC v. Dana C. Giacchetto and The Cassandra Group, Inc., 00 Civ. 2502 (LTS) (S.D.N.Y.)("Injunctive Action") and in the related administrative action on July 31, 2001, by the Commission.

In the Injunctive Action, Judge Laura Taylor Swain of the Southern District of New York entered final judgments on June 27, 2001 which permanently enjoin Giacchetto and Cassandra from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 204, 206(1), 206(2), 206(4), and 207 of the Investment Advisers Act of 1940 and Rules 204-2, 206(4)-2 and 206(4)-4 thereunder. The final judgments also direct Giacchetto to pay disgorgement and interest totaling $14,376,332 and a civil penalty of $100,000, and do not impose a civil penalty or disgorgement against Cassandra, which is in bankruptcy liquidation proceedings, on condition that Cassandra's assets are fully distributed in accordance with the applicable provisions of the United States Bankruptcy Code. The District Court entered the final judgments pursuant to Giacchetto's and Cassandra's offers of settlement to the Commission, in which Giacchetto and Cassandra neither admitted nor denied the allegations contained in the Complaint.

On July 31, 2001, the Commission issued an Order Instituting Public Administrative Proceedings, Making Findings, and Imposing Remedial Sanctions ("Order") against Dana C. Giacchetto and The Cassandra Group, Inc. These proceedings stem from the Commission's investigation of fraud and asset-kiting of client funds by a registered investment adviser, which resulted in the Injunctive Action. The Order, which bars Giacchetto from associating with any investment adviser and revokes Cassandra's registration with the Commission as an investment adviser, follows the entry on June 27, 2001, of permanent injunctions against Giacchetto and Cassandra in the Injunctive Action. Both Giacchetto and Cassandra consented to the Order without admitting or denying the Commission's findings.

The Commission's Complaint in the Injunctive Action alleged that Giacchetto and Cassandra, since at least September 1997 through April 3, 2000, improperly transferred and took custody of at least $20 million of client assets, of which a substantial portion was misappropriated. The Complaint alleged that the assets were misappropriated chiefly by Giacchetto causing checks to be issued from clients' custodial accounts at Brown & Company Securities Corporation, a registered broker-dealer, and then endorsing the checks himself and depositing those funds into Cassandra's main operating bank account. The Complaint further alleged that Giacchetto and Cassandra used client funds to, among other things, make payments to other clients, some of which Giacchetto and Cassandra previously defrauded, as well as payments for Giacchetto's living expenses and Cassandra's operating expenses.

The Complaint further alleged that Giacchetto and Cassandra concealed their mishandling and misappropriation of client funds by knowingly or recklessly making misrepresentations and misleading omissions to various clients, including 1) misrepresenting to clients that Cassandra invested their funds in securities transactions that never took place, including non-existent bond purchases; 2) representing to clients that their funds were invested in various private transactions when in fact such funds had been commingled in Cassandra's operating account and characterized as "loans" to Cassandra or as "deposits" on Cassandra's books; 3) misrepresenting to clients that Cassandra undertakes a "conservative" investment strategy and that Cassandra does not take custody of client assets; 4) providing false order tickets and portfolio statements to clients; and 5) falsely stating that clients' assets are held in "trust" or "escrow" accounts that did not, in fact, exist.

In addition to the Injunctive Action and administrative proceedings, on August 2, 2000, Giacchetto pled guilty to one criminal count of fraud under the Advisers Act in violation of Section 206(1) and 206(2) in a related criminal action captioned USA v. Dana C. Giacchetto, 00 Cr. 430 (RPP) ("Criminal Action"). The Grand Jury indictment in the Criminal Action alleged that Giacchetto misappropriated funds and assets belonging to clients of Cassandra, and that client funds were used to pay, among other things, Giacchetto's personal rent, cash advances, personal credit card bills, which in turn included bills for travel, hotels, dining, and entertainment, and Cassandra's rent, payroll, payroll taxes, attorney's fees, public relations agent fees, utility bills, bills for computer services, and credit card bills. On February 7, 2001, the District Court sentenced Giacchetto to serve 57 months in a Federal prison and be subject to post-incarceration supervised release for a term of 3 years.

See prior litigation releases nos. 16693 & 16499