Vertical executive convicted: Local investors lost $2 million in scheme.

Brown

George L. Theodule, do you still think you’ll get away it?  The FEDS don’t play…

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By T.J. GREANEY of the Tribune’s staff
Published Saturday, December 6, 2008

A Columbia businessman was convicted yesterday by a federal jury in Jefferson City of a multimillion-dollar investment fraud and participating in a money-laundering conspiracy.

Daryl M. Brown, 31, was the chairman of The Vertical Group, which had offices at 3210 Bluff Creek Drive and a “principal” partner of Cerberus Inc. in Fulton. Both corporations, prosecutors say, bilked investors out of more than $2 million with promises of high-yield, short-term returns that Brown and his partners said were safe and unavailable to the public.

During the scheme, which ran from December 2004 to September 2005, U.S. attorneys said in a written statement, Brown falsely claimed to be licensed by the Securities and Exchange Commission and/or the National Association of Securities Dealers. They also said Brown made false statements regarding the investments he was offering his victims, telling victims that in return for their investment – typically $50,000 or more – they would receive a profit of about 20 percent within 30 business days. After 30 days the investment would grow more rapidly, Brown is accused of telling investors.

Victims were told to wire funds to bank accounts in Florida and elsewhere. Instead of investing the money, prosecutors said, Brown used it to bankroll a lavish lifestyle, including chauffeur-driven limousines, entertainment and providing money to a girlfriend.

Brown also falsely claimed that he had a business degree from the University of Missouri, that he had played professional football with the Kansas City Chiefs and that he was involved in a multimillion-dollar trust, prosecutors said.

In September 2005, FBI agents arrested Brown at gunpoint outside his Columbia home after he tried to flee.

Brown was convicted of participating in a conspiracy to defraud investors and seven counts of wire fraud related to the conspiracy. He was also convicted of participating in a conspiracy to commit money laundering and three counts of conducting money transactions in criminally-derived property, as well as two counts of causing a person to travel across state lines as part of the investment scheme.

A spokesman for the U.S. Attorneys Office, Don Ledford, said these convictions mean a lot for victims.

“It’s not one of the biggest” cases we’ve tried, “but it’s not small potatoes either,” Ledford said. “If you’re one of the victims, it’s a huge deal.”

Ledford said at the upcoming sentencing hearing, District Judge Nanette Laughrey would rule on how restitution should be paid to the victims. The jury required Brown to forfeit $2 million of the proceeds from the scheme to the government.

The maximum penalty for all the charges would be over 200 years in prison, Ledford said, but the sentencing range will be based on a report presented by the federal office of probation and it likely would be much less than the maximum.

On March 28, 2007, Brown’s co-defendant, Sylvester L. Mitchell III, 38, of Columbia pleaded guilty to his role in the investment scheme, and a Clearwater, Fla., man entered a similar plea the previous year.

In 2007, a group of nine investors won a default judgment against Vertical under the federal Racketeer Influenced and Corrupt Organizations Act but have not collected damages.

Reach T.J. Greaney at (573) 815-1719 or tjgreaney@columbiatribune.com.

Here’s the link to that story: http://www.columbiatribune.com/2008/Dec/20081206News003.asp