St. Paul stockbroker Sherwin Brown barred from industry

Sherwin P. Brown, a dirt-poor Jamaican immigrant who went from mopping floors at Burger King to become a popular Twin Cities stockbroker who once drew standing ovations from his clients, was permanently banned from the securities industry Monday by a federal court.

The U.S. Securities and Exchange Commission (SEC) filed suit against Brown in 2006 alleging a pattern of securities fraud involving an investment firm he'd started called Brawta Ventures. Brown learned in 2007 that he was the target of a federal grand jury investigation in Minnesota, so on the advice of his attorney, he cited his Fifth Amendment right against self-incrimination and declined to respond to the SEC's allegations.

That decision led U.S. District Judge John Tunheim to grant the SEC's motion for a summary judgment, and on Friday he ordered Brown and a different company he controlled, Jamerica Financial Inc., to cough up $1,096,000 in assets and prejudgment interest, plus civil penalties of $480,000.

"This has been an unbelievable nightmare," Brown said Monday. He denied wrongdoing and vowed an appeal. "If there is injustice in this world, this is it," he said.

Richard MacPhie, who ghost-wrote Brown's unpublished autobiography, "Seven Years of Hell," called him a "true American success story."

According to MacPhie, Brown grew up "barefoot in the jungles" of Jamaica. He completed school there at age 12, then emigrated to Des Moines, where he lived with a host family and worked at Burger King while he obtained a general education diploma. Brown waited tables and attended community college for a year, then moved with his host family to St. Paul.

In a letter to the court, Brown said he worked two jobs to pay his way through the University of St. Thomas, where he got his degree in accounting. After a few years, he changed professions and went to work for American Express as a broker. He said he got into a dispute with the firm over a policy that required him to pitch only American Express products, so he started Jamerica in 1992.

Brown denied the charges, but he said he couldn't defend himself because the firm through which he conducted trades, AIG SunAmerica, settled the complaints before arbitration. Even so, Brown said, more than 100 clients with $25 million in assets stuck by him. He started Brawta Ventures in 2004, which ultimately became the focus of the SEC's lawsuit in March 2006. An SEC accounting found "unallocated" expenditures from Brawta totaling $877,236, including $496,550 that were transferred to Jamerica; $296,906 transferred to Brown or spent on his personal debts; and $110,177 in transfers the SEC couldn't follow.

The SEC said the transfers often came when Brown or Jamerica were running low on cash. The SEC said after Brawta transferred money to Jamerica, thousands of dollars went to a lawn care service and retailers such as Apple Store, Polo/Ralph Lauren, Coach, Circuit City, Helzberg Diamonds, Netflix and Victoria's Secret.

Brown filed for personal bankruptcy in June 2006, listing assets of $854,000 and liabilities of $3.4 million, including a $2.6 million liability to SunAmerica, which was suing him to collect on a contract provision that partially indemnified the company against investor complaints. Brown had legal representation for a while, but he said his lawyers at Briggs and Morgan quit after he ran out of money.

Because of the freeze on his accounts, Brown said, "I had no other way to pay bills other than to use the Jamerica checking [account] that I have, so I would pay things." He said most of the money went to business expenses. As for the personal expenditures, Brown said no one would dispute that if he's making money for investors, "I have the right to buy my wife a gift from Victoria's Secret, I have the right to pay my mortgage from the money that's coming out."

Brown was earlier found in contempt for court for violating court injunctions and the asset freeze.

In retrospect, Brown said, he never should have followed the legal advice that led to his refusal to testify and to the freeze on his accounts. "I was cornered," he said. "I couldn't defend myself."

Brown said he doesn't know what became of the grand jury's investigation, but he has not been charged.

He wondered aloud how he'd make a living if he can't work in the securities industry. "I can't fight the government," he said. "I don't have the money."