U.S. Securities and Exchange Commission
Litigation Release No. 21939 / April 20, 2011
Accounting and Auditing Enforcement Release No. 3272 / April 20, 2011
Securities and Exchange Commission v. Duane Martin and Gary Trump, Civil Action No. 09-cv-05259 (N.D. Ill.)
COURT ENTERS A FINAL JUDGMENT AGAINST STOCK PROMOTER GARY TRUMP
On April 12, 2011, the District Court for the Northern District of Illinois entered a Final Judgment against stock promoter Gary Trump in a civil action brought by the United States Securities & Exchange Commission (the “Commission”). The Commission sued Trump as well as Duane Martin, the former CEO of St. Charles, Illinois-based Universal Food & Beverage, Inc. ("Universal"), a now-defunct company, for violating federal securities laws. Trump was charged with violating the registration provisions of the Securities Act of 1933 (the "Securities Act") for improperly issuing S-8 stock to stock promoters and Martin's personal creditors. The Final Judgment entered against Trump permanently enjoins him from violating Sections 5(a) and 5(c) of the Securities Act and permanently bars him from participating in any penny stock offerings. It also orders him to pay $69,976.27 in disgorgement and prejudgment interest, but waives payment based on his demonstrated inability to pay. The Final Judgment was entered based on Trump’s Consent to Final Judgment in which he neither admitted nor denied the allegations in the Commission's Complaint.
The Commission's Complaint alleged that Trump and Martin violated the registration provisions of 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 pled several fraud claims against Martin.
The Commission previously settled its claims against Duane Martin by which Martin agreed to entry of (1) a permanent injunction, (2) a permanent penny stock bar, and (3) a permanent officer and director bar. In addition, on March 16, 2010, the United States Attorney’s Office for the Northern District of Illinois (“USAO”) charged Martin with wire fraud based largely on the misconduct identified in the Commission’s Complaint. Martin pled guilty and, on July 13, 2010, was sentenced to 41 months in prison and ordered to pay $618,441 in restitution to Universal’s creditors.