Former Massachusetts Senator Scooter Brown was tossed from office by an unknown because he proved himself to be mostly an empty suit....surrounded by questionable decisions and voting record that belied his campaign rhetoric.
Now a Carpet Bagger in New Hampshire, Scooter is replicating his conduct.....
Scott Brown cuts ties to Florida company
Gives up stock, says his role had become campaign distraction
By Todd Wallack & Noah Bierman
JUNE 04, 2014
JASON NUTTLE FOR THE GLOBE
Republican Scott Brown abruptly resigned Wednesday from an obscure Florida company and gave up stock initially valued at $1.3 million after facing a barrage of questions about his role as a “senior adviser,” a controversy that had dogged his US Senate campaign in New Hampshire.
Brown’s resignation from the advisory board of Global Digital Solutions Inc. was announced about two hours after a news media event in the state’s capital designed to highlight his official entry into the race. He was repeatedly challenged by reporters in Concord seeking answers about what he had done to earn the stock grant, and whether he had scrutinized the company before lending it his name.
“I’ve already answered it for two days,” Brown said, defending his role at the company. “We put out a statement.” The questions continued, and Brown said, “I am not really sure what else to say,” as cameras recorded him getting into his green GMC truck. Democrats promptly.....of the uncomfortable exchange.
By late afternoon Wednesday, he stopped defending his association with Global Digital Solutions, and his campaign sent out an e-mail announcing he was leaving the company and giving up the stock.
“It’s clear from recent media reports that my continued role with the company would be an unnecessary and unwanted distraction,” Brown, a former US senator for Massachusetts, said in the 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.”
The Globe reported on Sunday that Brown received 1.5 million shares of stock in Global Digital when he was announced as a member of its advisory board last fall. Brown has said he has not sold the stock, which company filings say would vest between January and September of this year. Following months of decline, the initial value of $1.3 million had dropped to $455,000 as of Wednesday, or 35 cents a share.
Accountants said the company is a highly risky investment and that its business practices raise numerous red flags. Global Digital Solutions was founded as a beauty supply company in New Jersey, selling hair spray, conditioners, and shampoos, before reinventing itself as a wireless data firm based in California, and then again last year as a South Florida-based firearms maker and gun-technology innovator. The publicly traded company has no revenue, no products, no trademarks, no patents, and only a “virtual office” space in West Palm Beach.
The company’s announcement in March that it intended to buy Remington Arms Co. LLC, one of the world’s largest gun manufacturers, for more than $1 billion was greeted with derision by Remington and others in the industry. Global Digital has just four employees, $271,776 in cash, and a market value of about $36 million.
Global Digital did not respond to a request for comment Wednesday evening.
Brown referred to Global Digital on Wednesday as a “start-up going through transition,” even though it was created 19 years ago. He has declined to say why he joined the board, how he came to know the company’s executives, and what level of scrutiny he gave its business activities.
Analysts said the issue — and Brown’s handling of it — constituted a major political stumble and could have ramifications for his bid to win the Republican primary and the right to face the Democratic incumbent, Senator Jeanne Shaheen, in November.
“This could not have imploded more,” said Wayne F. Lesperance Jr., a political science professor at New England College in Henniker, N.H. “This raises questions of integrity and good judgment.”
One of Brown’s Republican opponents, former state senator Jim Rubens, also said the association with Global Digital raises questions about his judgment.
“I ask myself: Would I lend my name to such a company? I would not,” Rubens said. “It would be damaging to my credibility as a business person to affiliate myself with a company like that.”
The New Hampshire Democratic Party hammered Brown and demanded he file a personal financial disclosure form, as other candidates in the race have done. Last month, Brown obtained permission to delay filing his financial disclosure form until Aug. 9, one month before the Republican primary.
“The fact is, everything we know about [Global Digital] was true when Brown joined its advisory board — and he joined anyway,” said the state Democratic Party’s communications director, Julie McClain. “New Hampshire voters deserve to know where else and from who else he was cashing in.”
Many companies have advisory boards — in addition to their formal corporate board of directors — to give additional advice about certain topics.
Still, many prominent business leaders and celebrities are reluctant to join advisory boards for small companies because of the potential risk to their reputation if the companies get into trouble — even though advisers don’t have direct control over the company’s operations.
“There’s a lot of reputation risk,” said Bob Arciniaga, founder of Advisory Board Architects in Greenwood Village, Colo., which helps companies establish and run advisory boards. Before deciding whether to accept a position, “good board members are going to do a lot of due diligence,” he said.
Arciniaga said he has never heard of any advisory board member receiving so much stock, and said many receive none at all.
“He is now going to get barbecued for it because he never should have taken it,” he said.
Brown originally joined the advisory board last September, saying he would provide the company with advice on its overall global strategy and its pending merger with Airtronic USA Inc., an Illinois company that supplies small arms and parts to the military and law-enforcement agencies. The Airtronic merger has since been scuttled amid litigation.
Brown previously said he acted as a sounding board for Global Digital, providing the firm with advice when needed, and defended the company as legitimate. He said he had no involvement in its daily activities.
Global Digital, which featured Brown’s picture on its website until Wednesday evening, used his name to promote the company and give it credibility.
Since Brown joined its advisory board, however, the company’s stock has fallen by two-thirds, after its merger with Airtronic fell apart and it has been unable to find other sources of products or revenue.
After losing his bid for reelection in the 2012 Senate race in Massachusetts, Brown has engaged in a variety of ventures. He has worked as a commentator on Fox News; given paid speeches; worked at a Boston law firm, Nixon Peabody LLP; served on the board of Kadant Inc., a Westford company that makes industrial equipment; and sat on the advisory board of a venture-capital-backed Boston startup, CoachUp Inc.
Nixon Peabody declined to say how much Brown was paid, what work he did for the firm, or what clients he represented. He left the firm and ended his work for Fox News earlier this year.
Kadant reported that he received $46,000 in cash and restricted stock worth nearly $389,000 last fiscal year (though only a portion of the stock has vested, and Brown hasn’t sold any shares). Brown had been a classmate with Kadant’s chief executive, Jonathan Painter, at Boston College Law School.
CoachUp, a service that helps connect athletes with private coaches and has raised $10 million in venture capital, said Brown helps the company with advice and using his personal network to help introduce CoachUp to parents and business leaders.
The company declined to say how much it pays Brown, who became an adviser in the spring of 2013.
Related:
New doubt about firm Scott Brown advised
Court filing calls announcement of a $95m deal false
JESSICA RINALDI/GLOBE STAFF
Former senator Scott Brown has said he will relinquish 1.5 million shares of Global Digital Solutions
When former Massachusetts senator Scott Brown was named last September as an adviser to an obscure Florida company, Global Digital Solutions Inc., the chief executive announced that Brown would offer “invaluable advice and guidance” on its upcoming merger with a small firearms company.
A month later, the news got even bigger. Global Digital announced that its pending new partner, the struggling firearms company, had an agreement worth an estimated $95 million to sell grenade launchers to an unnamed client.
But the head of that arms company, Airtronic USA Inc., later declared in a court document that there was no $95 million order. The value of all of Airtronic’s pending orders was $1.3 million, she swore in a court statement. And she said the press release quote saying she was “thrilled” about the deal was made up.
Related
It is unclear what role, if any, Brown played in the press release and failed merger. His office declined questions Thursday.
“Your conspiracy theories and assumptions are completely wrong,” Brown’s communications director, Elizabeth Guyton, said in response to queries. She did not elaborate, and Brown would not agree to an interview. During a campaign event Thursday, Brown’s campaign refused to make him available for questions and hurried him into a car.
In recent days, Brown has said he was a “sounding board” for the company, but not involved in day-to-day activities.
Brown, who is seeking the Republican nomination for the US Senate seat in New Hampshire, resigned Wednesday from the company and said he would relinquish his 1.5 million shares of its stock after he was bombarded with questions about his involvement in the Florida penny stock, saying it was becoming a distraction. In comments earlier this week, Brown called the company a “legitimate” start-up.
Executives from Global Solutions did not respond to an interview request and e-mailed questions on Thursday.
The Globe reported last Sunday that Brown received stock initially worth $1.3 million to join the advisory board of the firm, which has no revenue, no products, no trademarks, no patents, and only a “virtual office.” The stock has since declined by more than half.
Originally founded in 1995 to sell beauty products, Global Digital morphed into a wireless data company before repositioning itself last year as a weapons maker. Accountants who have looked at the company have said it was a risky investment.
Global Digital has announced a series of acquisitions that have not been completed. Among them was an announcement in March that it intended to buy Remington Arms Co. LLC, one of the world’s largest gun manufacturers, for more than $1 billion. That was greeted with derision by Remington and others in the industry. Global Digital has just four employees, and a market value of about $40 million.
But the complaint about the Airtronic press release — and the company’s boast about $95 million in pending agreements — raises fresh questions about whether Global Digital misled investors, and it could draw attention from the Securities and Exchange Commission, according to lawyers who specialize in securities.
“If those statements aren’t true, there’s the possibility for a securities fraud case to be brought,” said Thomas A. Sporkin, a former SEC enforcement official, now in private practice with BuckleySandler in Washington.
Global Digital announced on Sept. 9 that Brown was coming on board as a senior adviser, highlighting his importance to the pending Airtronic merger. While it was not known then, Brown was given stock initially worth $1.3 million in exchange for his service. At the time, Global Digital was trying to reinvent itself as an firearms company, and Airtronic was a small arms company trying to emerge from bankruptcy.
“I personally look forward to benefitting from Scott’s invaluable advice and guidance with regard to the Airtronic merger and our overall strategic direction,” Global Digital’s president, Richard J. Sullivan, said in the press release.
Brown was quoted in the release as saying that “I see a great deal of upside potential for the GDSI and Airtronic combination. . . ”
A month later, on Oct. 8, Global Digital announced that its merger partner had a $95 million deal to sell grenade launchers, and investors touted the press release on the stock message board. The stock jumped 8 percent.
It would be several days before Airtronic’s chief executive and owner, Merriellyn Kett, would even see the press release, after she was told about it by a supplier, she later said in a sworn statement.
“I am not aware of any basis that could render the statements in the press release truthful,” Kett said in a Nov. 25 declaration to the bankruptcy court.
Kett said she later asked Global Digital’s chief executive for an explanation, but Global Digital repeated the claim about the $95 million deal in another press release a week later.
It is unclear where the $95 million figure came from. In court documents, Sullivan said Kett “had no basis for complaining” about it and that she had agreed to the release of similar announcements about the deal (without the dollar figure).
Sullivan said he was simply responding to inquiries from investors and potential investors who wanted more information about a June 2013 announcement that Airtronic had agreed to supply grenade launchers to a “major international defense contractor.” The June 2013 release called it “the first of many expected orders” for the launchers, but did not have a dollar figure. A similar May 2013 release quoted Sullivan saying “this is a substantial contract that is expected to be followed by similar contracts in the future.”
Sullivan also pointed to an e-mail Kett sent him in September 2013 discussing a $307,000 order for grenade launchers.
The gun company, Airtronic, terminated the merger with Global Digital and recently emerged from bankruptcy. As part of an agreement with the company, Airtronic last month repaid Global Digital $1.5 million that had been lent, according to a bankruptcy court filing. Global Digital also agreed to remove all references to Airtronic from its website. It even amended the press release announcing that Brown would join the company as an adviser, removing Airtronic’s name.
Though Global Digital settled its dispute with Airtronic, it is suing the chief executive, Kett, individually, for $90 million for refusing to close the deal. Citing the ongoing lawsuit, Kett and her lawyer declined to comment for this article.
Richard M. Gelb, a Boston lawyer who handles securities cases, said he believes the press release would violate securities laws if it contains significant misstatements.
In this case, he said that Kett’s affidavit raises serious questions about whether the press release was accurate and could prompt government regulators or lawyers representing shareholders to investigate further.
“I would assume a regulator would take steps to determine why the press release and affidavit contradict each other,” said Gelb, a partner of Gelb & Gelb LLP, who reviewed the press release and affidavit.
In explaining why she wanted to call off the merger with Global Digital, Kett also said in court documents that the company failed to secure approval for the merger from federal regulators or disclose that Sullivan and his business partners have been the subject of several shareholder lawsuits involving separate companies, including one settled in 2004 for $5.6 million.
The Florida attorney general’s office said it has received no complaints about Global Digital. The SEC, the main agency that investigates securities fraud, said it could not say whether it has received any complaints about the company or has any active investigations into the firm.
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