Two Columbia Men Sentenced for $3 Million Investment Fraud

JEFFERSON CITY, MO—Matt J. Whitworth, United States Attorney for the Western District of Missouri, announced that two Columbia, Mo., men were sentenced in federal court today for their roles in a multi-million dollar investment fraud.

Daryl Miles Brown, 32, Sylvester L. Mitchell III, 39, both of Columbia, were sentenced in separate hearings before U.S. District Judge Nanette K. Laughrey. Brown, who was chairman of The Vertical Group, located in Columbia, and principal of Cerberus, Inc., located in Fulton, Mo., was sentenced to 15 years in federal prison without parole. The court also ordered Brown to forfeit to the government $2 million, which represents the proceeds of the investment scheme. Mitchell was sentenced to four years probation.

On Dec. 5, 2008, Brown was convicted by a federal jury of participating in a conspiracy to defraud investors and seven counts of wire fraud related to the conspiracy. Brown 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.

On March 28, 2007, Mitchell pleaded guilty to his role in the investment scheme. Mitchell was an employee of The Vertical Group and presented himself as the Chief Financial Officer of Cerberus.

Brown devised a business scheme to solicit victims to invest in what he claimed were opportunities to purchase high-yield, short-term investments that were unavailable to the general public. Brown referred to these investment opportunities as “Stand By Letters of Credit” or “SBLCs.” More than $2 million was invested in the nonexistent securities by victims of the fraud scheme. Brown and Mitchell were each ordered to pay restitution to all the victims.

During the scheme, which ran from December 2004 to September 2005, Brown falsely claimed to be licensed by the SEC and/or the National Association of Securities Dealers. Brown also 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 generally about 20 percent within 30 business days. Brown claimed that victims who remained invested after 30 days would stand to see a return of up to approximately 20 percent of their initial investment each week. Brown claimed that the investment was safe and that investors’ money could not be lost.

In addition to these false statements regarding the investments, Brown also falsely claimed that he had a business degree from the University of Missouri, that he played professional football with the Kansas City Chiefs, that he had several highly-placed business relationships and that he was involved in a multi-million dollar trust.

In carrying out his scheme, Brown gave his victims instructions to wire funds to bank accounts in Florida and elsewhere. Brown used the investor money for his own personal use, including such things as providing money to a girlfriend, entertainment and hotel rooms for Brown and his girlfriend, and renting automobiles and chauffeur-driven limousines.

This case was prosecuted by Assistant U.S. Attorneys Anthony P. Gonzalez and Lawrence E. Miller. It was investigated by the Federal Bureau of Investigation, the Missouri Attorney General’s Office and the Missouri Secretary of State’s Securities Section.