Securities Law Blog

Laurence M. Brown is being charged for the second time for violating federal securities laws in connection with another offering fraud. The Securities Exchange Commission (SEC) charged Brown and fellow certified public accountant (CPA) Ronald Mangini with fraud for allegedly selling phony securities to investors and pocketing the money.

The two Westchester County residents allegedly sold investors fake promissory notes and common stock in Infinity Reserves-Tennessee Inc., an inoperative company owned by a client of their accounting firm. The duo took the company name and represented themselves as senior officers with authority to sell the securities.

As early as 2008, Brown and Mangini began selling the securities to clients of their accounting practice and other investors, according to the SEC’s complaint filed in federal court in Manhattan.

The SEC claims Brown and Mangini promoted Infinity Reserves as being a profitable company operating a gas pipeline in Tennessee. They proclaimed to have a “captive market in its area and a stable minimum rate of production with quality gas that could be sold well above market prices.” The alleged fake notes promised investors a 10 percent annual return that would be paid semiannually on the principal amount of the investment.

According to the SEC complaint, Infinity Reserves owns a gas gathering and trunk pipeline system located in Tennessee that has not operated for more than a decade. The offering document put together by Brown and Mangini allegedly portrayed the investment as interests in an active system.

The pair reportedly raised more than $2.1 million from investors, returning approximately $136,000 to certain investors in the form of interest payments. In typical Ponzi scheme fashion, at least $1.6 million of investor funds were allegedly transferred to personal bank accounts controlled by Brown, Mangini, or family members, who are being named as relief defendants.

The SEC charged the CPAs with violations of the anti-fraud provisions of the federal securities laws, and seeks permanent injunctions, disgorgement of the defendants’ and of relief defendants’ ill-gotten gains plus prejudgment interest, and financial penalties.