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U.S. Securities and Exchange Commission

U.S. Securities & Exchange Commission

Litigation Release No. 18072 / April 4, 2003

Court Grants Summary Judgment against Defendant Carol Martino for Illegal Brokerage Activities and Market Manipulation; Orders Martino to Disgorge $4.416 Million, and Orders Her Husband to Turn Over a $2 Million Yacht Purchased with Proceeds of Martino's Illegal Brokerage Activities

Securities and Exchange Commission v. Carol C. Martino, et al., 98 Civ. 3446 (S.D.N.Y.)

By Order dated April 4, 2003, U.S. District Judge Milton Pollack granted summary judgment in favor of the Commission and against defendant Carol C. Martino and her former stock brokerage firm (CMA Noel, Ltd.), holding them liable for engaging in illegal brokerage activities during the period 1992 through 1995, and further holding Martino liable for engaging in a 1993 scheme to manipulate the stock price of RMS Titanic, Inc. (a company that attempted to salvage artifacts from the sunken ocean liner). The Court awarded the Commission disgorgement of Martino's illegal brokerage revenues ($4.416 million), plus prejudgement interest of $3,386,842.92, and other equitable relief. The Court further ordered Martino's husband, relief defendant Gerard Haryman, and his company, defendant JTM Ltd., to turn over to a court-appointed receiver a $2 million luxury yacht that Martino had purchased with proceeds of her illegal brokerage activities. The Court granted summary judgment following a hearing on the matter held on March 17, 2003.

The Commission sued Martino and CMA in May 1998 for repeated violations of a 1992 Commission order that barred Martino from acting as a stock broker, and for engaging in such activities without registering as a broker with the Commission (in violation of the federal securities laws). The Commission had barred Martino based upon her prior fraudulent activities as Executive Vice President of Wellshire Securities, Inc., a retail brokerage firm. In its April 2 ruling, the Court found that, from 1992 through 1995, Martino "willfully violated the Bar Order" by illegally brokering millions of dollars in sales of stock by several U.S. companies to foreign purchasers. The Court further found that Martino thus accumulated illegal brokerage commissions and fees totaling at least $4.416 million. The Court ordered Martino to disgorge that sum to the Commission, plus prejudgment interest on that amount (accrued from December 31, 1995 to the present).

The Commission further charged Martino with engaging in a scheme (along with defendant Paul Montle) to manipulate the stock price of RMS Titanic, Inc., one of Martino's U.S. brokerage clients. The Court found that Martino and others employed several manipulative devices to maintain and increase artificially Titanic's stock price during the Spring and Summer of 1993. Martino personally participated in the schemeby (1) "agreeing [with other Titanic shareholders] to control and order their sales of Titanic stock into the marketplace"; (2) "guaranteeing" Titanic's principal market maker "purchasers for his Titanic stock"; and (3) "paying brokers to influence their clients to purchase Titanic stock." The Court previously held defendant Paul Montle liable as well for this scheme.

The Commission also charged Martino's husband, Gerard Haryman, and his company JTM, Ltd., with helping Martino to hide her illegal brokerage revenues through the purchase of a $2 million yacht called "Je T'aime." In granting the Commission summary judgment on this charge, the Court found that "Martino purchased the yacht in November 1997 in an attempt to hide her assets from creditors." The Court further found that, although the yacht nominally was held by JTM, "Martino had unfettered access to the Yacht since the date of purchase," and "[n]o legitimate claim to the Yacht exists upon which Haryman or JTM might rely." Consequently, the Court ordered Haryman and JTM "to turn over the Yacht or its proceeds to a court-appointed receiver as partial payment of the disgorgement figure imposed on Martino and CMA."

In addition, the Court permanently enjoined Martino and CMA from future violations of the federal securities laws.

On January 7, 2002, in a separate criminal proceeding brought by the United States Attorney for the Southern District of New York, Martino pled guilty to three counts of personal income tax evasion and three counts of falsely subscribing to corporate returns. The indictment in the criminal action includes charges that Martino failed to disclose certain income, including illegal brokerage revenue that was the subject of the Commission's civil enforcement action against her. In April 2002, Martino received a twenty-eight month sentence, which she began serving at a federal detention center in Miami, Florida. On December 12, 2002, due to a serious illness, Martino was released from prison and is presently on supervised-release.



Modified: 04/07/2003