Senate candidate Greg Brannon faces fraud allegations in civil lawsuit
02/03/2014 9:41 PM
02/03/2014 10:09 PM
One is a former medical school classmate and family friend. The other is the husband of his one-time pregnant patient.
The two men say that in 2010, Greg Brannon helped convince them to invest a combined $250,000 in a technology company he co-founded that promised to develop an “augmented reality” application for smartphones. The investment, company officials promised, was a once-in-a-decade opportunity.
Now, three years after the company abruptly shuttered its operations, Brannon is facing a civil legal complaint alleging he offered misleading advice.
The years-old case – which is scheduled to go to trial Monday – is being seen in a new political context as Brannon emerges as one of the leading Republican challengers to front-runner Thom Tillis in the crowded GOP U.S. Senate race. The winner of the May primary will face Democratic incumbent Kay Hagan.
Brannon, a Cary OB-GYN, defends his role as a board member at the Raleigh-based tech company, Neogence Enterprises, and is asking for the charges to be dismissed. In an interview last week, Brannon declined to discuss the case at length. “I can’t wait for my day in court,” he said.
The company’s founding and quick demise are outlined in hundreds of pages of Wake County court documents recently reviewed by The News & Observer and Charlotte Observer. Brannon is one of two Wake County defendants in the case; the other is CEO Robert Rice of Raleigh. Another company executive recently was dismissed from the case.
A judge also dismissed charges of fraud and violating trade practices. The two investors are seeking to recoup their money in addition to damages and attorney fees.
In court papers, the investors, Lawrence “Larry” Piazza, of Maine, and Salvatore “Sam” Lampuri, of Raleigh, described in detail how Brannon pitched them on the company’s bid to create Mirascape, a smartphone application that is a “social augmented reality network connecting people, places and things.” A company prospectus promised to fill in the gaps that Facebook, Google, Foursquare and other prominent apps were missing.
Brannon’s involvement may hinge on an email he sent April 30, 2010, to Piazza, his medical school friend, and other investors stating that the company’s chief sales officer, John Cummings, met with Verizon in New York City. The company, he said, needed $100,000 to $200,000 to develop a pitch for a subsequent meeting weeks later.
“I know all of you are BUSY!!!” Brannon wrote, according to court documents. “I need you to give a few minutes to look at this potential. THANK YOU for your TRUST!! Greg.”
Rice, the CEO, followed up with a memo, suggesting Verizon might feature the Mirascape app on all its Droid mobile devices. “The challenge here, is that we have to jump to warp speed to accelerate development,” he wrote. “This is a one-shot opportunity.”
The investors labeled the statements misleading when the deal didn’t come to fruition. In court papers, Cummings said that Verizon never discussed making Mirascape a pre-installed feature on its devices.
Before the emails, Piazza had invested $50,000 in the company. But based on the Brannon and Rice correspondence, Piazza asserted in court papers that he put another $100,000 into the company in May 2010.
In court documents, Brannon acknowledges sending the April 30, 2010, email about the Verizon opportunity, but he suggests his role was merely as the messenger, communicating what he heard from the company’s sales associate through Rice.
“I expected that all our investors were savvy enough and sophisticated enough to understand that opportunity was just that,” he wrote. “It wasn’t a slam dunk, it wasn’t a guarantee.”
Lampuri, a Raleigh-area plumber whose wife went to Brannon’s medical clinic, put $100,000 into Neogence in September 2010. Both Lampuri and Piazza received a convertible promissory note, which would mature at a certain date and allow a return of the investment or conversion to ownership stock.
In a deposition, Lampuri describes how Brannon talked business with him when his wife came for monthly doctor appointments during her pregnancy. “He pretty much spoke about Neogence every time my wife was in stirrups,” he told attorneys.
According to court documents, Piazza reconnected with Brannon in 1995 when he called to tell him he had cancer. The Brannon and Piazza families visited each other in Maine and North Carolina, and they even went to Disney World together.
The two men often discussed investing and in the mid-’90s, Piazza put $25,000 into Arckosian Entertainment, another company led by a then-24-year-old Rice. It, too, wasn’t successful; the company dissolved in 1998, according to state records.
Brannon invested $60,000 into Arckosian, he wrote in court papers, and put between $8,000-12,000 into Neogence in “needy times.”
In a deposition, Piazza said he wouldn’t invest with Brannon again. Asked why, he answered,“Trust.”
Brannon offered his own narrative into why Neogence failed, blaming it in part on Piazza for meddling in the company’s affairs and saying employees went without pay for weeks.
At one point, Brannon even offered to liquidate his 401(k) retirement account to pay Piazza back because he “felt morally that I should do so to satisfy a friend.” Piazza declined, Brannon wrote, only to come back later and ask for a refund. By then, Brannon said he had other obligations surrounding recent deaths in his family and the adoption of his third child from China.
When Piazza informed Brannon that he intended to cash out his promissory note in early July 2011, Brannon wrote that he and Rice acted on an attorney’s advice and resigned their board positions and closed the company’s doors.
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