U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21597 / July 22, 2010
Securities and Exchange Commission v. Laurence M. Brown, et al., Civil Action No. 10-CV-5564 (S.D.N.Y.)
The Securities and Exchange Commission today filed a civil action against two certified public accountants based in Armonk, New York, Laurence M. Brown and Ronald J. Mangini, for fraudulently selling securities to investors and misappropriating the money for their personal use.
In its complaint, filed in the United States District Court for the Southern District of New York, the SEC alleges that, from as early as April 2008 until June 2010, Brown and Mangini sold what purported to be the common stock and promissory notes of a company called Infinity Reserves-Tennessee Inc., which they represented to be a "gas gathering and trunk pipeline system." In fact, the securities Brown and Mangini sold were fictitious. Infinity Reserves is the name of a company owned by one of their clients, and the company's principal asset is a now defunct natural gas pipeline in Tennessee. Without the knowledge or authorization of the client, who is the sole shareholder of Infinity Reserves, Brown and Mangini have been falsely holding themselves out to investors as senior officers of Infinity Reserves with authority to sell the phony securities at issue.
The complaint further alleges that Brown and Mangini have sold the securities to a number of investors, including clients of their accounting practice, and have illegally obtained over $2 million from those investors. Brown and Mangini have returned only small amounts of funds to certain investors as interest payments, while diverting the vast majority of investor funds — at least $1.6 million — to their and their family members' personal use.
The SEC's complaint also names as relief defendants certain of the defendants' family members and related entities, who received hundreds of thousands of dollars of investor funds: Brown's wife and daughter, Susan and Sloane Brown; Infinity Farms, Ltd., which received investor funds through a bank account controlled by Brown, and his wife and daughter; Mangini's wife, June Mangini; and Maylil, Inc., which received investor funds through a bank account controlled by Ronald and June Mangini.
The SEC's complaint charges Brown and Mangini with violations of the anti-fraud provisions of the federal securities laws, Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Exchange Act Rule 10b-5. In addition to emergency relief, including an order to freeze assets, the SEC's complaint seeks permanent injunctions, disgorgement of the defendants' and relief defendants' ill-gotten gains plus prejudgment interest, and financial penalties from the defendants.
In addition to the SEC's charges, the U.S. Attorney's Office for the Southern District of New York today brought criminal charges against Laurence Brown concerning the same illegal activities alleged in the Commission's complaint.