In a case the Securities and Exchange Commission called one of the biggest pyramid schemes in history, federal prosecutors secured a guilty plea from another participant, who has agreed to testify against Stan Van Etten, former chief executive officer of International Heritage Inc., the News-Observer in North Carolina reported.
David Walter Brown, 50, of Raleigh, IHI's outside accountant, pleaded guilty in federal court in Raleigh to a conspiracy charge, agreeing also to testify against Van Etten. Brown agreed to surrender his certified public accountant licenses.
As the managing partner of the firm Eilers, Jones, Brown and McLeod, Brown supervised the firm's largest account-IHI, a luxury good company with an Amway-like business model, the News Observer reported. Court records indicate that Brown certified audits of IHI's financial statements that were then sent to the SEC, which was reviewing the IHI's application to become a publicly traded company in the late 1990s. That was later abandoned in favor of the bond sale, the News Observer reported.
Brown's lawyer, David Long of Raleigh, told the News Observer that they opted to cooperate despite believing they had a good defense. "It's sort of like getting a hurricane warning-you either stay and ride it out or evacuate," Long said. "We decided to evacuate."
Brown specifically pleaded guilty to conspiring to lie to SEC officials about IHI's financial health in the course of the federal agency's litigation against the company, according to court records, the News Observer reported.