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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21187 / August 27, 2009

SEC v. Duane N. Martin and Gary Trump, Case No. 09-cv-05259 (N.D. Ill.)

SEC SUES FORMER UNIVERSAL FOOD & BEVERAGE, CO. CEO FOR FRAUD

The Securities and Exchange Commission (the "Commission") announced today that on August 26, 2009, it filed a civil action in the U.S. District Court for the Northern District of Illinois, charging Duane Martin — former CEO of St. Charles, Illinois-based Universal Food & Beverage, Inc. ("Universal"), a now-defunct company — and stock promoter Gary Trump with violations of federal securities law.

The Commission's Complaint alleges that Martin and Trump violated the registration provisions of the Securities Act of 1933 (the "Securities Act") by improperly issuing S-8 stock to stock promoters and Martin's personal creditors. Trump, who took S-8 shares in exchange for promoting Universal stock, (a) helped engineer the illegal S-8 offering by hand-picking a team of promoters who participated in the offering and (b) illegally distributed his S-8 shares to the public without registration.

The Complaint also alleges that Martin violated the antifraud provisions of federal securities law in at least three instances. First, Martin misrepresented the true purpose of the S-8 offering in Universal's Form S-8. Second, Martin reviewed, signed, and certified Universal's 2005 Form 10-KSB which (a) recorded bogus "Consulting Agreements" with the S-8 recipients as prepaid assets, thereby overstating Universal's assets and understating its losses, (b) falsely stated that Martin was deferring 50% of his salary when, in reality, he had improperly paid himself $240,000 of deferred salary to which he was not entitled, and (c) failed to disclose $858,871.66 in payments that Martin directed to himself and his creditors in 2005 and 2006, including the deferred salary payment, payments of S-8 stock and cash to his creditors, and $234,430.66 in short-term loans that Martin took from Universal in violation of Section 13(k) of the Securities Exchange Act of 1934 (the "Exchange Act"). Third, Martin defrauded investors in a February 2006 preferred stock offering by misrepresenting (a) the use of proceeds from that offering, and (b) the nature of services provided by the S-8 "consultants."

The Commission's Complaint seeks a court order permanently enjoining Martin and Trump from violating the registration provisions of the Securities Act of 1933 (the "Securities Act") [Sections 5(a) and 5(c)]. It also seeks to enjoin Martin from violating the antifraud provisions of the Securities Act [Section 17(a)] and the Exchange Act [Section 10(b) and Rule 10b-5], and from aiding and abetting violations of Sections 13(a), 13(b)(2)(A), and 13(k) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder. In addition, the Complaint seeks an order (a) requiring Martin and Trump to pay disgorgement and a civil monetary penalty, (b) barring Martin and Trump from participating in any offering of penny stock, and (c) barring Martin from serving as an officer or director of a public company.

SEC Complaint

 

http://www.sec.gov/litigation/litreleases/2009/lr21187.htm


Modified: 08/27/2009