A central figure in a $130 stock manipulation scheme that led to the collapse of two small brokerage firms pled guilty Thursday in a California federal court.

Kenneth D'Angelo pleaded guilty to charges of conspiracy to commit securities fraud and wire fraud in a bizarre plot that led to a separate civil lawsuit against Saudi Arabian arms dealer Adnan Khashoggi and

Deutsche Bank



Securities and Exchange Commission

, meanwhile, filed civil charges against D'Angelo. The agency wants to disgorge the profits he generated from the scheme, which stemmed from a plan to manipulate shares of


, a defunct Los Angeles marketing and advertising firm.

D'Angelo artificially pumped up the price of GenesisIntermedia's shares in order to convince a series of brokerages to loan money against the stock. D'Angelo is alleged to have orchestrated the scheme, which collapsed in September 2001, in conjunction with the company's chief executive officer Ramy El-Batrawi, who is not identified by name in either the SEC complaint nor in a criminal filing by federal prosecutors.

The SEC, in its complaint, said the two men also had an accomplice, an unidentified individual who is described as "Saudi Arabian national.'' A source familiar with the investigation said the alleged accomplice is Khashoggi.

So far, neither the SEC nor federal prosecutors have filed any charges against Khashoggi or El-Batrawi. But prosecutors, in a criminal information, refer to the two unidentified men as "co-conspirators''

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Securities regulators and prosecutors allege that Khashoggi had a financial interest in an offshore company,

Ultimate Holdings

, which owned at least 75% of GenesisIntermedia's stock.

The authorities contend D'Angelo orchestrated a scheme in which shares owned by Ultimate Holdings were used as collateral to get the brokerages to make a series of stock loans. To inflate the price of the shares, D'Angelo allegedly struck a side-deal with an unidentified financial commentator to tout the stock on CNBC and Bloomberg TV.

For a while, the elaborate scheme worked. Shares of GenesisIntermedia rose from $1.67 to as high as $25 a share in June 2001, even though the company never reported a profit. The plot collapsed in September 2001, when the stock plummeted in the aftermath of the Sept. 11 terror attacks and the brokerages were unable to collect on the loans they had made.

"This was a much better way of cashing in on a stock manipulation scheme because the defendants never had to sell their stock back into the market,'' said Scott Friestad, an SEC assistant director of enforcement. "The broker dealers here were duped.''

One of those brokerage's allegedly duped into making a loan was

MJK Clearing

, a Minneapolis-based brokerage that closed its doors in September 2001 because of $120 million in losses it suffered on GenesisIntermedia's stock. The collapse of MJK resulted in the Securities Investor Protection Corp., an agency that compensates investors when a brokerage files for bankruptcy, to make a $177 million payout to MJK customers--one of the biggest payments in SIPC history.

The other brokerage firm that went under because of the scam was New Jersey-based Native Nations Securities.

Earlier this year, the federal trustee overseeing the SIPC liquidation of MJK filed a fraud and racketeering suit against Khashoggi. The lawsuit also named Deutsche Bank as a defendant because its Canadian arm was an integral player in the chain of stock loans and it suffered only minimal losses.

The SEC complaint alleges that D'Angelo "secretly compensated'' the head of Deutsche Bank Canada's securities lending department. The official is not identified. The criminal information in the case refers to the unidentified Deutsche employee as a co-conspirator who was a "long time friend and business associate'' of D'Angelo.