Agoura Hills man pleads guilty in stock fraud John Loesing Acorn Staff Writer

Agoura Hills man pleads guilty in stock fraud
John Loesing
Acorn Staff Writer

Aerick Wesley Brown, a 35-year-old Agoura Hills resident, faces up to 20 years in prison after pleading guilty in federal court to two counts of securities fraud.

The U.S. District Attorney’s office said Brown executed a unlawful "short sale" in which he made millions of dollars trading technology stocks at the expense of two well-known brokerages.

From 1994 to 1998, Brown instructed Minneapolis-based Piper Jaffray and San Francisco-based Van Kasper & Company to sell shares of Dell Computer and America Online stock he didn’t own, according to federal authorities.

Short sales are commonplace on Wall Street.

Brown hoped to buy the stock back at a lower cost and turn a profit, but he failed to make good on the deal when prices unexpectedly rose, said Randall Lee, assistant U.S. attorney.

"It was essentially a short sale without the intent to perform if he made the wrong bet," Lee said. "It was basically a free bet."

Brown’s goal was to take advantage of the time gap between the deal’s transaction date and settlement date to create confusion over the status of the stock ownership, Lee said.

Brown was charged with the unlawful short sale of 100,000 shares of AOL stock and 40,000 shares of Dell stock.

Brown bet the two stocks would fall in price, but Dell’s stock more than tripled while AOL’s value grew sevenfold and split twice.

Piper Jaffray and Van Kasper lost a combined $7.7 million when Brown failed to purchase and deliver the stock at the higher prices.

According to the indictment, Brown operated accounts with false information using his name and that of his 4-year-old son and a fictitious Bahamian corporation for which he said he was the money manager.

"[Brown] falsely represented that his son was a 29-year-old real estate consultant whose annual income was over $100,000 and whose net worth was over $1 million," said the indictment. "[Brown] also forged his son’s signature on the agreement."

Brown, identified by authorities as the former coach of the Westlake High School girls’ soccer team, remains free on bail.

In addition to jail time, Brown will be required to make full restitution and pay fines up to $2 million, according to Lee.

Sentencing is scheduled for Oct. 30.

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