Drew “Bo” Brownstein, the founder and chief executive officer of Denver-based Big 5 Asset Management, pleaded guilty to trading on inside information about a corporate merger.
Brownstein, 35, made more than $2.5 million in illegal profits for his hedge fund and for relatives by trading on a tip in advance of Apache Corp.’s $2.7 billion acquisition of Mariner Energy Inc. in April 2010, prosecutors said.
“I’ve severely disappointed my family, colleagues, investors and friends,” Brownstein told US District Judge Robert Patterson in Manhattan federal court yesterday. “I’m truly sorry.”
The sentencing guideline is 37 to 46 months with the plea agreement, the judge said. Brownstein, who pleaded guilty to one count of securities fraud, will be sentenced on Dec. 20. He was released on a $500,000 personal recognizance bond.
“You had inside information about the fact that Mariner’s stock would probably go up because it was about to be acquired by another company,” Patterson said to Brownstein.
The tip originated with H. Clayton Peterson of Denver, a retired former Arthur Andersen partner who served on Mariner Energy’s board of directors, prosecutors said. Peterson pleaded guilty to conspiracy and securities fraud in August. His son, Drew, a Denver financial adviser, pleaded guilty to the same charges.
Clayton Peterson, who was appointed to Mariner’s board in March 2006, said he passed information about the planned transaction in April 2010 to his son.
Brownstein said in court that he purchased Mariner securities on April 13 and April 14, 2010. On April 13, he said, “I had several phone conversations with Drew Peterson, a lifelong friend, who told me Mariner had agreed to be acquired.”