Ex-Mouseketeer Gillespie Convicted in Stock Fraud

Darlene Gillespie, an original member of television’s “Mickey Mouse Club,” was convicted Friday of engaging in an elaborate stock buying fraud and obstructing a Securities and Exchange Commission probe.

After deliberating more than two days, a Los Angeles federal court jury returned guilty verdicts against the former Disney Mouseketeer on a dozen counts of securities fraud, mail fraud, obstruction of justice, perjury and conspiracy.

Gillespie, who became an operating room nurse after her 1950s television career, appeared composed as the verdicts were read.

She said afterward that she was surprised and disappointed by the jury’s decision. “It’s hard to deal with,” she added.

Her lawyer said he plans to appeal.

Free on bond, she is due back in court March 8 for sentencing. She faces a maximum of 90 years in prison.

Gillespie’s fiance, businessman Jerry Fraschilla, 61, was sentenced to 18 months in prison last month after pleading guilty in the case.

In his closing arguments to the jury, Gillespie’s lawyer blamed Fraschilla for whatever crimes she might have committed, contending that she fell in love with “the wrong person” and became an unwitting pawn in the scheme.

The couple, who still live together in Oxnard, were indicted last year in connection with a scam to bilk several brokerages by “free-riding,” which is the placement of buy orders for stock without the means or intention to pay for the shares.

Assistant U.S. Atty. Jack S. Weiss, who tried the case, said Gillespie and Fraschilla used bad checks to buy thousands of shares in a Colorado-based company, Unique Mobility, figuring to make a windfall if the stock price climbed but risking nothing if it tumbled.

The prosecution charged that they also bought stock by opening accounts in the name of a fictitious investor named Michael Andrews.

All told, the couple placed orders on margin for more than 194,000 shares of stock valued at $827,000 in 1992 and 1993.

The SEC filed a civil suit against Fraschilla and Gillespie in 1994 for free riding. It was settled a year later when they agreed to pay nearly $165,000 in fines and reimbursement to the brokerages.

But the SEC also referred the case for criminal investigation. FBI agents found evidence that the couple provided forged documents and lied during depositions taken during the SEC’s civil action.

Some of those forgeries were used to verify the existence of the fictitious investor they had created.

Another was a letter that Gillespie claimed she received from her Oppenheimer & Co. broker, telling her to ignore margin calls from the firm’s New York headquarters.

The broker, Gary Handler, denied during the trial that he wrote the letter, which would have constituted a direct violation of SEC regulations. Weiss noted that the document misidentified Handler’s title as an Oppenheimer vice president. He was a senior vice president.

In response, Gillespie’s defense lawyer, Charles Rondeau, suggested that Handler might have deliberately created the error so he could later say the letter was a forgery.

The defense also sought to blame Handler for some of the bad checks Gillespie wrote.

Taking the stand in her own defense, Gillespie said Handler arbitrarily blocked the release of an $18,000 check that she was supposed to receive after selling some stock. She said he was miffed because she was about to shift her account to another brokerage, Advest.

As a result, she said, she inadvertently wound up writing a bad check to Advest for stock purchases.

The prosecution attacked her story, noting that Gillespie wrote four letters to Oppenheimer after the alleged incident, never once mentioning the $18,000.

Gillespie also tried to fix blame for other bad checks on her bookkeeper, now dead, who she said kept her checkbook. The bookkeeper also worked for Fraschilla.

She said she began investing in the stock market in 1992 while employed as a surgical nurse at Sherman Oaks Community Hospital. Another nurse there had amassed a large nest egg, she said, by making concentrated buys in a single stock, Amgen.

Gillespie said she decided to follow that tack with Unique Mobility, a high-tech maker of electric motors based in Golden, Colo., whose stock was touted to her by a doctor at the hospital.

“She felt the company was going to be a home run for her,” Handler testified. He said she told him the stock, then trading at $6 to $7 a share, would soon soar to $50 or more. It currently trades at about $5 a share.

Gillespie told the jury that she relied on Fraschilla for market advice but she carefully avoided singling out her fiance for blame.

It was not until the weeklong trial drew to a close that her lawyer attacked Fraschilla, contending that he deceived and manipulated Gillespie as he had other women. “The fact that she still lives with Mr. Fraschilla demonstrates the power he has over her,” Rondeau said.

Weiss dismissed the attempt to portray Gillespie as a pawn, calling it a desperate ploy to shift blame.

After Friday’s verdicts, the prosecutor said he hoped the case “will send a very clear message that obstructing the Securities and Exchange Commission and lying to the SEC are serious crimes which will be prosecuted.”

This is not Gillespie’s first criminal conviction. She and Fraschilla were convicted last year of shoplifting at a Macy’s department store in Ventura.

She also is suing the Walt Disney Co. and the Screen Actors Guild, contending that she was not paid for rebroadcasts of “Mickey Mouse Club.”