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— In August of last year, San Diego stock swindler Ronald D. Brouillette Jr. -- trying to get sprung from jail -- told a judge that he had a bundle of bucks stashed offshore. It wasn't true. But if it had been, the federal government would have snatched it anyway.

Early last month, the Securities and Exchange Commission announced that it intends to nail Brouillette (pronounced Brew-YET) for $1.08 million as punishment for his role in a penny stock scam. Problem: Brouillette is in a California prison, having been sentenced last year to 14 years for his role in a different penny stock swindle.

The San Diego district attorney's office put Brouillette away before the federal securities agency could hit him with a penalty of $1 million and disgorgement of ill-gotten gains of $84,000.

As the district attorney's office was putting on its case last year, Brouillette, in jail at the time, claimed he had loot secreted in a bank on the offshore tax haven of the Cayman Islands. He told a superior court judge that if he could just get out of jail, he would return the money to his victims.

"He kept telling the judge and me that he had money in an offshore account," recalls Steve Davis, the deputy district attorney who prosecuted the case. "He produced a statement from a Caymans institution, the Bank of Butterfield, that purported to show he had an account there with substantial holdings. With help from the Justice Department, we were able to prove that he had just gone to a website and downloaded the logo of the bank and just forged the document showing that he had a couple of million there."

So the federal securities agency won't get its money. But, shrugs Michael Lowman, assistant chief litigation counsel for the agency in Washington, D.C., "Who knows? The judgments are good for 20 years. To the extent that we find that he has money outside the country or in a bank account stashed away," the agency might collect someday.

In any case, the securities agency, which doesn't have criminal prosecution authority, is more interested in sweeping out stock and bond industry crooks.

"What's important for us is that somebody like Mr. Brouillette never works in the industry again," says Lowman. "We have a good working relationship" with criminal prosecutors such as Davis, he says.

On October 5, a federal court in Washington, D.C., banned Brouillette from participating in penny stock offerings and from violating broker registration laws. In October of 2001, he had been banned from the business by the National Association of Securities Dealers, an industry self-regulatory body, for "egregious unauthorized trading."

The word "egregious" accurately describes Brouillette's modus operandi in herding investors to their slaughter. Suffice it to say that Brouillette was fired by two of the most disorderly houses in the brokerage business, now mercifully deceased: Pacific Cortez, née La Jolla Capital, and Centex Securities, née La Jolla Securities. Getting fired by them is like getting booted out of the Ku Klux Klan for being a bigot.

Pacific Cortez was closed down by the California Department of Corporations in 1999. Creditors got 2.5 cents on the dollar. Two years ago, the chief executive, Harold Bailey (B.J.) Gallison, was sentenced to five years in the slammer for defrauding investors.

Centex Securities was shuttered by the National Association of Securities Dealers in 2001 for failing to pay fees in 23 arbitrations. Its chief executive, Bruce Biddick, was charged in 2003 with paying undisclosed kickbacks to an undercover federal agent in a sting operation; Biddick thought he was bribing a mutual fund to buy a stock he was pushing. He was sentenced to four months in the hoosegow plus three years of supervised release.

The federal securities agency spanked Brouillette for his role in hawking a telecom stock named Pay Pop. Some Canadian penny-stock touts had falsified the accounting and sent out news releases claiming that the company was growing at 125 percent a year, when in fact it was contracting, and that it owned a posh resort that it hadn't paid for.

Working from San Diego, Brouillette served as a conduit for the falsehoods and added some of his own. He told clients that the stock was going to go public and Wall Street's Bear Stearns was going to run it up at the rate of 50 cents a week. He told customers he had his own money in Pay Pop stock. That was not true, says the agency; he was paid for his efforts with 1.7 million shares of stock, most of which he put in the name of his then-wife.

To make it appear that there was lots of activity in the stock, Brouillette would have one of his accounts buying and another selling. He bought the stock for customers without their authorization and also crammed the shares in accounts of customers who "were incapacitated by illness and lacked the mental facilities to approve or review the trades," says the agency.

Oh yes, one of the Canadians who pulled off the scams with Brouillette went to jail in Houston "for doing a Nigerian letter scheme. He then suffered an aneurysm and lost mental capacity," says Lowman. "He spent a year in detention and infirmaries, but on September 2 the case was dropped" because the chap was a vegetable.

The district attorney last year had nailed Brouillette for another caper. After he was kicked out of the two corrupt brokerages and then banned from the industry, he took the firms' prospect lists -- called "suckers lists" -- and set up shop on his own in local hotels. He was not a registered broker, of course.

Pacific Cortez/La Jolla Capital had sold stock that it had received for nothing -- a gift for touting the issue. Customers weren't told that. The stock often entered the United States secretly from offshore.

Brouillette thought this was a great sales gimmick. So he went to some companies, such as Kestrel Energy and Adams Golf. He told them he would merchandise their stock in return for cash or some shares. "Some companies were interested, but none ever made a deal," says Davis. But that didn't deter Brouillette: he still told customers that he would deliver the stock, even though he had no way of getting any.

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