U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 22591 / January 11, 2013
Securities and Exchange Commission v. Gary J. Martel, D/B/A Martel Financial Group and MFG Funding, (United States District Court for the District of Massachusetts, Civil Action No. 1:12-cv-11095-FDS)
Final Judgment Entered Ordering Massachusetts-Based Investment Adviser to Pay Over $7.2 Million
The Securities and Exchange Commission ("Commission") announced that, on January 7, 2013, the United States District Court for the District of Massachusetts entered a final judgment by default against investment adviser Gary J. Martel, a resident of Chelsea, Massachusetts, in a case originally filed by the Commission in June 2012. The Commission charged Martel, who conducted business under the names Martel Financial Group and MFG Funding, with selling fictitious investment products and using the funds raised for purposes other than making the investments he promised. The Court froze Martel's assets at the time the Commission filed the case. Among other things, the final judgment recently entered by the Court ordered Martel to pay over $7.2 million in disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.
According to the Commission's complaint, over the course of several years, Martel raised money from investors in Massachusetts, Vermont, New Hampshire, New York and Florida by promising to invest their money in certain "pass through" bonds with favorable interest rates, as well as by promising to make pooled investments in mortgage-related securities or, more recently, Facebook's initial public offering. The Commission's complaint alleged that Martel's bonds and investment pools were fictitious, and instead of investing his clients' funds on their behalf as he promised, Martel used the funds for other purposes, including to make payments to earlier investors. The complaint charged Martel with violating the antifraud provisions of the federal securities laws.
The final judgment entered by the Court came in response to a Commission motion for default judgment and permanently enjoined Martel from violating: Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; Section 17(a) of the Securities Act of 1933; and Sections 206(1) and (2) of the Investment Advisers Act of 1940. The final judgment also ordered Martel to pay disgorgement in the amount of $3,261,438, representing profits gained as a result of the conduct alleged in the complaint, plus pre-judgment interest on the disgorgement in the amount of $695,806, and a civil penalty in the amount of $3,261,438.
On December 12, 2012, Martel pled guilty to criminal charges brought by the United States Attorney for the District of Massachusetts, based on the same conduct. On January 4, 2013, the Commission instituted related administrative proceedings against Martel to determine what, if any, remedial action is appropriate and in the public interest. Among the relief that could be imposed in the administrative proceedings is a bar prohibiting Martel from involvement in certain parts of the securities industry.
For further information, please see Litigation Release No. 22396 (June 20, 2012).