SEC Files Suit Against 3 Valley Residents
Three Valley residents, including a former Mickey Mouse Club Mouseketeer, have been sued by the Securities and Exchange Commission for the fraudulent stock-buying practice known as “free riding.”
The complaint, filed in U. S. District Court in Los Angeles on Wednesday, named Burbank resident Darlene Gillespie, 53, an ex-Mousketeer and registered nurse, as one of a trio who allegedly violated federal securities laws by purchasing stock in 1992 and 1993 without the means or intention of paying for it. Gillespie has filed for liquidation of her debts through personal bankruptcy in federal court, the lawsuit says.
Also named as a defendant is Jerry J. Fraschilla, 56, president of Northridge-based Pacific Southwest Corp., a real estate and financial services company, and a resident of Sherman Oaks at the time of the alleged SEC violations, according to the lawsuit. Both Fraschilla and Pacific Southwest are also in bankruptcy liquidation, the complaint says. He and Gillespie co-own a company called Top Gun Ventures, through which Gillespie controls stock brokerage accounts, the lawsuit says.
The third defendant is Fraschilla’s brother-in-law, Tarzana resident Michael Andrews, 32, who worked for a Pacific Southwest subsidiary.
According to the complaint, from August, 1992, through May, 1993, the defendants placed purchase orders to buy stock in a publicly traded company called Unique Mobility through five brokerage firms under margin agreements, meaning they borrowed money from the brokerages to pay for the trades.
But the defendants allegedly never paid for the stock purchases, or wrote bad checks for the amounts owed. In some cases, the lawsuit states, the defendants would place orders through a brokerage firm to purchase the shares in their accounts with other firms that were being liquidated after they didn’t pay for their trades. When making the stock purchases, it says, the defendants also misrepresented their incomes and net worth.
The defendants could not be reached for comment.
Losses on various accounts opened by the defendants that were suffered by stock brokerages ranged from about $1,000 to $64,500, the complaint states. The brokerages include PaineWebber Inc., Advest Inc., Seidler Amdec Securities Inc., Oppenheimer & Co. and Kemper Securities Group Inc.
The SEC seeks a court order barring the defendants from future securities law violations, repayment of profits and losses avoided on the stock trades cited in the complaint plus interest, and other monetary penalties.
A separate legal dispute involving Gillespie was settled earlier this year. The former Mouseketeer had sued Walt Disney Productions in Los Angeles Superior Court in 1990, claiming that Disney took advantage of her young age when she signed a contract in 1955 to perform on the Mickey Mouse Club TV show. A Walt Disney spokesman said the suit had been “mutually resolved and the terms are confidential.”
