A relatively minor business dispute has received increased attention because it involves a political figure. Two North Carolina individuals have filed a civil action against Republican U.S. Senate candidate Greg Brannon, who was on the board of directors of Neogence Enterprises, a now-defunct technology corporation. The company’s chief executive officer is also named as a defendant. The plaintiffs claim that the defendants misled them about the company’s financial prospects when they were asked to invest. They are asking for the return of $250,000 plus court costs and attorneys’ fees.
The plaintiffs allege that the defendants persuaded them to invest in the now-defunct company under misleading circumstances. According to the complaint, the plaintiffs were repeatedly told that Verizon was interested in Neogence technology for a smartphone app. The defendants allegedly claimed Verizon would consider using the app if Neogence could raise the funds to start development quickly. Attorneys for the plaintiffs say that in reality Neogence’s sales officer was negotiating with Verizon only for an advertising deal.
The investors say that they received convertible promissory notes in return for their investment. Under both federal and state law, these are considered securities, and both civil and criminal sanctions can apply to the sale of securities if the seller made untrue statements of a material fact in connection with their sale. In his response to the lawsuit, Brannon claimed that the sales officer made the claims about the app, and that he was simply passing on that information to the investors. He is seeking to have the suit dismissed.
Federal and state securities laws are strict in terms of the disclosures required when a company is selling its securities. An attorney with experience in business and commercial law may be able to help a client prepare offering materials that are in compliance with applicable rules and regulations.
Source: North Carolina Legislative Black Caucus, “Senate candidate Brannon defends himself against allegations he misled investors,” February 3, 2014.
Source: News & Observer , “US Senate candidate Brannon defendant in tech suit “, Gary D. Robertson, February 03, 2014