Agoura Hills Man Pleads Guilty in Federal Court in Stock Fraud Case
An Agoura Hills man bet against two top-performing tech stocks, and it could cost him 20 years in prison or $2 million.
Aerick Wesley Brown, 35, pleaded guilty in federal court Monday to making false representations to cull money from investment firms. In what prosecutors called a “free ride” scheme, Brown in 1998 instructed U.S. Bancorp Piper Jaffray and First Security Van Kasper to sell shares of Dell and America Online stock he didn’t own.
Assistant U.S. Atty. Lucy Koh said Brown was counting on the stock prices falling before he had to turn over the stock to the buyers. He then planned to buy the stock at the lower price to cover his purchase costs.
Brown got caught by predicting the wrong stocks would fall. Dell’s stock value more than tripled in 1998, and AOL stock split twice and grew sevenfold that year. Minneapolis-based Piper Jaffray and San Francisco-based Van Kasper lost a combined $7.7 million in Brown’s scheme.
“I don’t know that was such a good move to bet against the tech stocks in 1998,” Koh said.
Brown faces up to 20 years in federal prison or a $2-million fine, Koh said.
Koh said the strategy sometimes works because brokers don’t know whether a seller has all the stock he puts up for sale until the paperwork is complete. In a high-profile case, Darlene Gillespie, an original member of television’s “Mickey Mouse Club,” was convicted in March 1999 for a similar scheme.
