Huffpost Politics

Scott Brown Resigns From Firm Whose Executives Were Sued For Securities Fraud [UPDATE]

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Former Sen. Scott Brown (R-Mass.), who has criticized the judgment of his Senate opponents, may face questions about his own.

Executives at a Florida firm with substantial ties to Brown were sued in 2012 for allegedly committing securities fraud in a "pump and dump" case involving a separate company.

Brown, who is attempting to unseat Sen. Jeanne Shaheen (D-N.H.), joined the West Palm Beach-based Global Digital Solutions Inc.'s advisory board in September. The Boston Globe reported Sunday that he received $1.3 million worth of stock in exchange. The firm, which purports to be a firearms manufacturer, does not yet seem to do much other than seek investors.

GDSI CEO Richard Sullivan and CFO David Loppert were among those accused two years ago of defrauding the shareholders and creditors of a marketing technology company, Argo Digital Solutions, by transferring its assets to a shell company they controlled, rVue Holdings.

The plaintiff settled with GDSI's executives for an undisclosed sum last month. According to court documents, Sullivan and Loppert were accused of boosting Argo's shares from 25 million to 250 million -- claiming that there would be a $100 million initial public offering -- and then moving the new shares to rVue, leaving Argo to fold.

Neither GDSI nor Brown's campaign responded to a request for comment.

Correspondence between the Securities and Exchange Commission and GDSI obtained by The Huffington Post shows that the SEC noted that the company understated company losses, contained various accounting inaccuracies, failed to disclose stock ownership by company executives and inappropriately claimed eligibility for a safe harbor protection in its securities registration filed in September.

Brown's campaign told The Boston Globe that he "has an advisory role" with GDSI but "is not involved in the day to day management or decisions of the company.”

The former senator, who has worked as an attorney, Fox News commentator and paid speaker, will not file a financial disclosure form reporting all of his sources of income until Aug. 9, a month before the Granite State's Republican primary.

Brown's connection to GDSI could serve as an avenue of attack for Shaheen's campaign, who may echo local media in arguing that it demonstrates a questionable vetting of his business ventures.

HuffPost Pollster, which combines all publicly available polling data, shows Shaheen leading Brown by 8 percentage points.

UPDATE: 6/4, 5:30 p.m. -- On Wednesday, Brown said that he had resigned from GDSI's advisory board and would give up his stock, according to The Boston Globe.

“It’s clear from recent media reports that my continued role with the company would be an unnecessary and unwanted distraction,” Brown said in a statement. “I want the people of New Hampshire to know they are my top priority. Therefore, I am resigning my advisory position with the company and relinquishing all my rights to the restricted stock that has been granted me, effective immediately.”

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Scott Brown got big stake in obscure Florida firm - The Boston Globe