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The Boston Globe

Politics

Scott Brown cuts ties to Florida company

Gives up stock, says his role had become campaign distraction

The Florida building where GDSI’s offices are located.

JASON NUTTLE FOR THE GLOBE

The Florida building where GDSI’s virtual office is located.

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.

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“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 posted video 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:

Scott Brown defends stake in Florida company

Scott Brown got big stake in obscure Florida firm

Scott Brown on defense with gun rights group

Shaheen has bipartisan reputation, but votes party line

Scott Brown wants New Hampshire to know his roots run deep

Noah Bierman can be reached at noah.bierman@globe.com. Follow him on Twitter @noahbierman.
Todd Wallack can be reached at todd.wallack@globe.com.
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