U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21909 / March 30, 2011
Securities and Exchange Commission v. LandOak Securities, LLC, et al., Civil Action No. 3:08CV209 (E.D.TN March 29, 2011)
The Securities and Exchange Commission (“Commission”) announced today that the Honorable Thomas W. Phillips, United States District Court Judge for the Eastern District of Tennessee, entered a judgment against LandOak Securities, LLC (“LandOak Securities”) and Patrick L. Martin (“Martin”). The judgment restrained and enjoined LandOak Securities and Martin from future violations of Sections 204, 206(1),(2) and(4), and 207 of the Investment Advisers Act of 1940 (“Advisers Act”) [15 U.S.C. §§ 80b-4, b-6(1), (2) & (4), and 80b-7] and Rule 206(4)-2 and 204-2 thereunder [17 C.F.R. §§ 275.206(4)-2 and 275.204-2]. LandOak Securities and Martin also were ordered to pay disgorgement in the amount of $880,512.16, plus prejudgment interest thereon in the amount of $111,628.38. The judgment further provides that if the parties cannot agree on whether a civil penalty should be imposed or the amount of any such civil penalty, the Commission may file a motion requesting that the Court determine the civil penalty and for purposes of that motion, the allegations of the Commission’s Complaint shall be deemed true. LandOak Securities and Martin consented to the entry of the order without admitting or denying the allegations of the Commission’s Complaint.
The Complaint, filed on May 22, 2008, alleged that between July 1997 and July 1998, Martin and his co-defendant Michael A. Atkins (“Atkins”) offered and sold to investors approximately $3.6 million in promissory notes and membership interests in LandOak Mortgage, LLC (“LandOak Mortgage”), a Tennessee entity they founded and controlled. According to the Complaint, thirteen of the approximately thirty-five investors in LandOak Mortgage were also LandOak Securities advisory clients, who together invested a total of $1.8 million in LandOak Mortgage. As represented to investors at the time of the offering, LandOak Mortgage loaned the raised funds to LandOak Development, LLC (“LandOak Development”), another Tennessee entity partly owned by Martin and Atkins. According to the Complaint, LandOak Development used the funds to purchase and develop commercial property, but when LandOak Development repaid those funds, Martin and Atkins misappropriated over $2.8 million of funds due to LandOak Mortgage investors. In July 2002, Martin and Atkins misappropriated over $1.5 million from LandOak Mortgage’s bank account and diverted the funds to Atmospheric Glow Technologies, Inc. (“AGT”), a public company in which each owned a substantial interest and were both members of its board of directors. Further, the Complaint alleged that Martin and LandOak Securities made false statements in LandOak Securities’ Commission filings and failed to maintain certain required advisory books and records.
See also: L.R.-20597