‘Pump-and-Dump’ Broker Sentence Upheld

A federal appeals court upheld the three-year securities fraud sentence Monday for a San Diego broker engaged in a stock “pump and dump” scheme.

Bryan Laurienti was a broker at the Hampton Porter investment firm, which traded extremely cheap and thinly-traded securities.  He and his brother and a group of other brokers pushed the shares on clients and later dissuaded them from reselling. Several brokers bought the shares in their own names at lower prices and sold at artificially higher prices they generated by reselling the stocks.  They also traded among client accounts without telling clients.

This is Laurienti’s second appeal of his sentence, which was lowered by four months and restitution cut from $1.1 million to $204,000.

The 9th U.S. Circuit Court of Appeals upheld the trial judge’s rejection of his plea for leniency.  “It had good reason to do so, as it appears Laurienti has transferred assets to his ex-wi9fe and engaged in a post-conviction plan to avoid paying restitution. In light of Laurienti’s long-term involvement in an elaborate scheme to defraud those who place their trust in him, we cannot classify the thirty-six month sentence as unreasonable,” wrote Judge James Carr, a visiting judge from Ohio.  He was joined by Judges Marsha Berzon and Paul Watford.

Market Collapse

After the stock market Internet bubble burst in 2000 the inflated shares fell and clients lost money.  Hampton Porter went out of business.

Laurienti was one of eight men charged in the pump and dump scheme.  Three men, including Laurienti’s brother pled guilty in 2006 and the remaining five went to trial.  Laurienti and three others were convicted.  Only one was acquitted.

The appeals court originally upheld Laurienti’s conviction in 2010 but overturned his 40-month sentence and $1.1 million restitution order.

Laurienti had argued the trial judge failed to hold a hearing on whether Laurienti knew the securities rule he was violating.  The appeals court said he had plenty of opportunity during his trial to make the argument he didn’t know the rules.

Case: U.S. v. Laurienti, No. 11-50294


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