U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19814 / August 28, 2006
SEC v. Terry Richard Martin, et al., United States District Court for the Western District of Washington, Civil Action No. C 03-2646 C
Court Enters Judgment Against Investment Banker Kenneth R. Martin in Municipal Bond Fraud Case
On August 24, 2006, United States District Judge John C. Coughenour in Seattle, Washington entered judgment against Kenneth R. Martin in a civil action brought by the Securities and Exchange Commission. The Commission's case concerns the fraudulent sale of $20 million in municipal bonds for the Holmes Harbor Sewer District, a Washington state agency. The judgment enjoined Martin from future violations of the antifraud provisions of the federal securities laws and ordered Mr. Martin to disgorge his ill-gotten gains in accordance with a plan supervised by the Bankruptcy Court. Mr. Martin consented to the entry of the judgment pursuant to a settlement with the Commission.
In its complaint, the Commission alleged that Mr. Martin was the investment banker who oversaw the underwriting of the bonds for his firm, IBIS Securities LLC. The bonds were intended to finance the building of certain public purpose portions of a private office-building complex. However, according to the complaint, the developer and others lied to investors about how bond proceeds would be used to acquire land for the project; falsely claimed that a prominent investment bank was involved in providing additional private financing for the project; falsely claimed that the project was already fully leased to a "Triple A" credit-rated company; and failed to disclose kickbacks to several of the offering participants. Under the terms of the settlement, Mr. Martin neither admitted nor denied the Commission's allegations against him.
The Commission's action against Kenneth Martin, and the injunction issued by Judge Coughenour, were pursuant to Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5.