The SEC has charged Laurence M. Brown and Ronald Mangini, both certified public accountants, with fraud after uncovering their scam to sell fake securities to investors and then misappropriate the investments. According to the SEC, Mr. Brown and Mr. Mangini used the name of a company owned by a client of their firm without permission and falsely represented themselves as president and secretary-treasurer of the company. Since April of 2008, the two men have obtained $2.1 billion million in unsuspecting investments, using $136,000 and a Ponzi scheme architecture to pay off some investors while diverting another $1.6 million into their own personal bank accounts.
Mr. Brown and Mr. Mangini used the company Infinity Reserves-Tennessee Inc. to illegally sell company stock and promissory notes that guaranteed 10% annual returns to investors. While the company’s principal asset, a gas gathering and trunk pipeline system, has been inoperative for over 10 years, the two men marketed investment in Infinity Reserves as “an active system with an interconnect into the Duke Energy main east-west trunk line” and wooed investors with false statements about the company’s hold on the “captive market in its area, a stable minimum rate of production, and quality gas that could be sold at a 20 percent premium over market prices.” After convincing their investors to part with their money, Mr. Brown and Mr. Mangini either used the funds to return interest payments to a few investors or misappropriated the money to line their own pockets and those of their families.
“Brown and Mangini not only deceived investors into making investments in a pipeline that was not producing any gas at all, but they stole the identity of a company owned by a client in order to do it,” stated George Canellos, Director of the SEC’s New York Regional Office, in the press release. “Brown and Mangini also victimized and betrayed the trust of other accounting clients who invested in their scheme.” Previously, Mr. Brown had been charged with “violations of the antifraud provisions of the federal securities laws in connection with another offering fraud” in 1994. He was then banned from association with brokers, dealers, investment companies or advisors, municipal securities dealers, or government securities brokers or dealers.
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