THE COURT: Good afternoon.
MR. ROSEN: Good afternoon, your Honor. Keith Rosen and Shannon Hanson for the government.
For the record, now is the time the Court has set for a Change of Plea Hearing in the matter of United States of America versus Matthew W. Brown, criminal action number 09-46-JJF. The defendant is present in the courtroom with his counsel, Mr. Amador.
Your Honor, I have a fully executed copy of the Plea Agreement signed by myself on behalf of the government, the defendant signing personally and counsel, which I would hand up.
As well, your Honor, the Plea Agreement makes reference to a letter between counsel that's incorporated into the terms of the Plea Agreement.
The parties have that letter -- we have requested -- would request that the letter be submitted under seal and can address that after the court reviews it.
We would request a sidebar if the court has any questions about that letter.
I will hand that up to the clerk as well.
THE COURT: All right.
Mr. Amador, good afternoon.
MR. AMADOR: Good afternoon, your Honor.
THE COURT: Mr. Brown, do you want to step up to the podium?
THE COURT: Good afternoon, Mr. Brown.
THE DEFENDANT: Good afternoon.
THE COURT: I'm sure as you have been told, I have to ask you some questions so that I can be satisfied that you're competent and capable to enter this guilty plea, that you fully understand the charges, that you are doing this voluntarily without any coercion or threat and that there's a basis in fact for you to plead guilty.
I'm going to ask you these questions under oath. It's important that you give truthful responses, because if it's later determined that you weren't truthful, the government could charge you with a new and separate crime such as perjury or making a false statement. Do you understand that?
THE DEFENDANT: Yes, your Honor.
THE COURT: I'll ask the clerk to administer an oath to you.
(At this time, the defendant was placed under oath.)
THE COURT: Tell me your full name.
THE WITNESS: Matthew Whitney Brown.
THE COURT: How old are you?
THE DEFENDANT: 27.
THE COURT: How far did you go in school?
THE DEFENDANT: Twelfth grade, graduated high school.
THE COURT: Where was that?
THE DEFENDANT: Norfolk Christian in Tallahassee, Florida.
THE COURT: In Florida?
THE DEFENDANT: Yes.
THE COURT: Are you working now?
THE DEFENDANT: Yes, sir?
THE COURT: What do you do?
THE DEFENDANT: I work for a corporation called Vertical Group.
THE COURT: What's your basic task?
THE DEFENDANT: I teach consulting. I work for a company called ADVFN.
THE COURT: Have you ever been in a hospital or treated as an outpatient for any kind of mental illness, psychiatric or psychological disorders?
THE DEFENDANT: No, sir.
THE COURT: Have you ever been in a residential program, a hospital or some other live-in program or treated as an outpatient for any kind of drug or alcohol addiction?
THE DEFENDANT: No, sir.
THE COURT: In the last 24 hours, have you used any illegal drugs?
THE DEFENDANT: No, sir.
THE COURT: Have you used any prescription drugs, or over-the-counter medicines that could affect your ability to understand what's going on here today?
THE DEFENDANT: No, sir.
THE COURT: Have you drank any alcohol in the last 24 hours?
THE DEFENDANT: No, sir.
THE COURT: And you feel you've had adequate chance to talk to Mr. Amador about your case and he's been available to you to advise you throughout your negotiations of this plea?
THE DEFENDANT: Yes, your Honor.
THE COURT: What you're charged with?
THE DEFENDANT: Yes, your Honor.
THE COURT: I'm told that you want to plead guilty to Counts I, IV, V and VIII as set forth in the Indictment, is that correct?
THE DEFENDANT: Yes, your Honor?
THE COURT: All right.
Tell me what you did with regard to -- we'll start with -- we'll follow the Memorandum of Plea Agreement here. We'll start with Counts I and V that charges you with Conspiracy to Commit Securities Fraud.
Tell me what you did that makes you think you're guilty.
THE DEFENDANT: Myself and others agreed to take part in a scheme to manipulate the value of certain stocks that were publicly held corporations called GH3 and AAGH.
THE COURT: Page two of the Plea Agreement, if you will go there and take a look at paragraph two.
It says that you understand if you were to proceed to trial, and it says Counts I, IV, V and VIII, that the government would have to prove each of the following elements of the offenses beyond a reasonable doubt. So with regards to the offense I'm asking you about now, Counts I and V, you understand that the government would have to prove that on or about the dates charged in the Indictment, that two or more people conspired to commit the crime of securities fraud and/or the crime of Laundering of Financial Instruments, and that you knowingly joined in that conspiracy.
Do you understand those elements?
THE DEFENDANT: Yes, your Honor.
THE COURT: And you understand the government's obligation to meet them with regard to Counts I and V?
THE DEFENDANT: Yes, your Honor.
THE COURT: I'm going to ask you about Counts IV and VIII. Tell me in your own words what you did that makes you think you're guilty there.
THE DEFENDANT: Myself and others conspired to launder the proceeds of the profit from the manipulation of the GH3 and AAGH proceeds.
THE COURT: Again, paragraph two, you see where it says about the elements, that you conspired with two or more people with regard to the crime of Laundering of Financial Instruments, and specifically references IV and VIII Counts, it says you knowingly joined that conspiracy. You believe the government could meet those elements?
THE DEFENDANT: Yes, your Honor.
THE COURT: I'm going to ask the -- I'm going to ask the prosecutor to tell me what evidence they have that they were going to use against you if this case went to trial on Counts I, IV, V and VIII. I'm going to ask you to listen carefully because at the end of that -- their presentation, I'm going to ask you if you agree with the parts of the evidence that relate to your conduct and conspiracy and its objective. Okay?
THE DEFENDANT: Yes, your Honor.
THE COURT: Mr. Rosen?
MR. ROSEN: Yes, your Honor. Were this -- were this matter to go to trial, the government would be prepared to prove the following:
Defendant Matthew Brown is pleading guilty to Conspiracy to Commit Securities Fraud and Conspiracy to Commit Money Laundering in regards to the market manipulation of two over-the-counter securities: GH3 International also known as GHTI and Asia Global Holdings Corporation, also known as AAGH.
In October 2006, defendant Matthew Brown and separately indicted co-defendants Jacob Canceli, Pawel Dynkowski, Joseph Mangiapane, Jr, Richard Bailey and Florian Ternes, both GH3 executives, met and agreed that GH3 would issue millions of shares of the company's stock to Canceli. GH3 also promised that it would provide favorable press releases to make the company's stock more attractive to investors. Dynkowski's role was to create demand for the stock through manipulative trading and then to time the subsequent sales from Canceli's brokerage accounts. Throughout the scheme, defendant Brown was to act as the liaison between the participants.
GH3 laid the groundwork for the scheme in two ways.
First, on October 30, 2006, GH3 executed a 1 for 20 reverse stock split. For almost all of that month, GH3 had traded for mere hundredths of a penny when it traded at all. The reverse split brought the stock price back to 1.4 cents. The price slid in November to around half a penny on very little volume, but the stock now had more credibility in the eyes of prospective investors.
Second, GH3 transferred via a conduit named Gary Heath, 312 million GH3 shares to Canceli's brokerage accounts at Spartan Securities Group and Bishop Rosen & Co, in three increments on December 4, 8, and 12, 2006. GH3 instructed the transfer agent to issue the shares without restrictive legend because they were supposedly part of a private placement under Rule 504 of Regulation D with a registration exemption based upon Minnesota law for private placements made to accredited investors. If these 312 million shares had been registered, the market manipulation of GH3 shares would never have happened; the manipulation scheme only worked because the market did not know that these new shares existed.
On December 4, 2006, Dynkowski launched a buying campaign for shares of GH3 in which he and separately indicted co-conspirator Gerard D'Amara, through his company Market Solutions, Inc, and others each separately bought the stock through December 13. From December 7 to 13, Dynkowski's coordinated market activity represented between 9% and 23% of the total volume of transactions for GH3's stock on each day. During this period, Dynkowski traded with the objective of supporting the stock's price and enabling as many profitable sales from Canceli's accounts as possible. Dynkowski timed this campaign to raise the price of GH3's stock to coincide with a series of press released from the company starting on December 7, 2006 that touted its revenues and products, at least one of which Dynkowski ghost-wrote. Instant messages retrieved from Brown's and Dynkowski's computers showed that they each knew when these press releases were to be released, and Dynkowski timed his buying and selling activities accordingly.
Market Data 
Markets 
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