Newport lawyer arrested in stock fraud case
Federal officials Thursday arrested a Newport Beach lawyer accused of participating in what authorities called a scheme to falsely boost a Boston company’s stock so his co-conspirators could sell their shares for a $3 million profit.
Richard Weed, 52, is suspected of facilitating the plan by creating false legal documents so two Massachusetts men, Coleman Flaherty and Thomas Brazil, could obtain millions of free shares in a ticket-selling business called CitySide Tickets Inc.
Federal prosecutors allege that Flaherty and Brazil began promoting the stock to potential investors in what is known as a “pump and dump” scheme.
Investors allegedly were told that CitySide was about to buy smaller ticket firms across the nation, a move that would purportedly make Ticketmaster want to acquire CitySide.
According to a U.S. Securities and Exchange Commission lawsuit filed in Boston, Flaherty and Brazil claimed CitySide’s stock could jump from 50 cents a share to $3.50 “overnight” if Ticketmaster bought the company.
When the hype started driving up CitySide’s shares, the two dumped their stock, netting them about $3 million, according to the SEC.
Prosecutors say Weed was paid more than $100,000 to help with the scheme, which ended in 2010 when the company’s stock collapsed after Flaherty and Brazil cashed out.
“CitySide was billed as the hottest ticket in town, and investors were encouraged to get in the game when the playing field was actually tilted against them,” said Paul Levenson, director of the SEC’s regional office in Boston. “Weed exploited his position of legal authority to enable Brazil and Flaherty to get the stock needed to pull off the scheme, and he served as an officer and director of CitySide to help them secretly control the company.”
An attorney for Weed could not be reached for comment Friday.
In addition to the SEC’s lawsuit, Weed, Flaherty and Brazil face conspiracy, securities fraud and wire fraud charges filed by the U.S. attorney’s office in Massachusetts. If convicted, each could face a maximum of 20 years in prison and millions of dollars in fines.
The SEC’s civil action seeks financial penalties including a requirement that the trio to hand over any profits, including interest, from the scheme.