Senate candidate Brannon defends himself against allegations he misled investors
Posted February 3, 2014 11:42 a.m. EST
Updated February 3, 2014 4:34 p.m. EST
Raleigh, N.C. — Republican U.S. Senate candidate Greg Brannon is scheduled to defend himself in a civil court case next week against allegations he misled a pair of investors in a technology start-up, according to court documents.
Brannon, a Cary ob-gyn, has been endorsed by both regional North Carolina tea party groups as well as tea party conservatives such as U.S. Sen. Rand Paul and Ann Coulter. Although he trails state House Speaker Thom Tillis in the money chase, he is one of the strongest challengers to the GOP front-runner. The winner of the May Republican primary will challenge incumbent Democrat Kay Hagan in the fall general election.
According to documents filed in Wake County Superior Court, in early 2010 Brannon was on the board of directors of a technology start-up called Neogence, a company that promised to produce an "augmented reality" application called Mirascape for smart phones. In a description of the application posted in the Google Play online store in 2011, the company says the application will help users "explore the world around you and connect with people, places, and things. Mirascape is the Android 'app for everywhere.' Earthmarks™ aggregate things happening near you into a single 'supervenue.'"
Brannon helped recruit investors for the company, including Lawrence Piazza and Salvatore Lampuri, the plaintiffs in the case.
Among the things that Brannon told the two men, the court filings say, is that John Cummings, Neogence's sales officer, met with an executive for tech giant Verizon. According to the court file, Brannon told the potential investors that Verizon would consider including Mirascape as part of the standard set of software included on a broad category of the company's smartphones if the company could get up and running quickly. That purported interest, the court files say, came during a meeting Cummings had in New York.
"What my clients later learned ... is there was never any discussion whatsoever that this application, Mirascape, could be placed as original equipment on Verizon smartphones," said Steven Epstein, a lawyer for Piazza and Lampuri. Instead, he said, what was discussed was a potential advertising deal.
According to lawyers involved with the case, Brannon says that he was passing on information from Cummings and did not intend to mislead investors. Brannon also makes that case in his response to the lawsuit, which also alleges that Piazza had a "pattern of demanding accountability for every penny spent" that was "so burdensome that the executives did not have time to lead the company but instate only (had) time to attempt to satisfy Piazza's unrelenting demands."
Brannon's filing also seeks to have the court dismiss the suit.
"I'm looking forward to my day in court. I'm confident it will be resolved," Brannon said in an emailed statement when asked about the case. Pressed for more on his side of the story, a spokesman for Brannon emailed back a one-line statement, "I'm confident it will be resolved."
Brannon's lawyer, Michael Frazier, did not immediately return calls seeking comment.
Brannon, along with Robert Rice, Neogence's CEO, are defendants in the case. The civil suit would have likely gotten little notice except for Brannon's U.S. Senate run. According to documents on file with the North Carolina Secretary of State's office, Neogence's permission to do business in North Carolina has been revoked because the company failed to file its annual reports.
Filing for the U.S. Senate campaign opens on Feb. 10, the same day the Mirascape case is scheduled for trial. The timing is less than ideal for Brannon, who will both have to take time away from campaign and deal with allegations that he misled investors. Brannon has campaigned as fiscal conservative who will stick to his principals once he reaches Congress.
A spokesman for the Tillis campaign declined to comment on the case.
In an affidavit that is part of the court file, Lampuri says that Brannon first approached him about investing in the company on May 25, 2010, "while visiting his medical office for my wife's obstetrical checkup." Sometime around Sept. 24, after he said he was told repeatedly of Verizon's purported interest, Lampuri invested $100,000.
Piazza said in a affidavit that he first invested $50,000 in the company in February 2010. In April 2010, Piazza recounted getting an email from Brannon emphasizing the good outcome from the Verizon meeting.
"I know all of you are busy!!! I need you to give a few minutes to look at this potential. THANK YOU for your TRUST!! Greg," the email read. Piazza said he invested another $150,000 in the company.
Both men were issued "convertible promissory notes," which give investors the option of reclaiming their investments plus interest or converting their interest into stock. Under North Carolina law, such notes are "securities," and selling such instruments by giving out false information violates the state's securities fraud law. Both Piazza and Lampuri say the company shut down before they could recoup their investments. The suit seeks to recoup their money directly from Brannon and Rice.
The lawsuit filed by Lampuri and Piazza in October 2012 is a civil, not criminal, matter. Epstein said he did not believe that Brannon or his business partners had been reported to criminal authorities. To defend himself against the claims, Brannon will have to show that he had no way of reasonably knowing that the information he was passing on was false.