Securities and Exchange Commission

Litigation Release No. 16406 /January 10, 2000

Securities and Exchange Commission v. Donald J. Martineau (United States District Court for the District of Massachusetts C.A. No. 00 CV 10044 (MEL))

SEC Charges Former Stock Broker Donald J. Martineau
in $9.2 Million Scheme To Defraud Customers

The Securities and Exchange Commission ("Commission") today announced the filing of civil fraud charges against Donald J. Martineau, a former stock broker residing in Tewksbury, Massachusetts, charging Martineau with fraudulently inducing nine of his brokerage customers to invest at least $9.2 million in fraudulent investment schemes. The United States Attorney's Office for the District of Massachusetts also today announced the filing of related criminal charges against Martineau.

Specifically, the Commission alleged that, during the period November 1989 through August 1998, Martineau induced several customers to purchase promissory notes by falsely claiming that the proceeds would be used to make secured loans. He also fraudulently induced customers to sell their existing securities based on false promises that the proceeds would be invested in commercial paper. The Commission further alleges that, in fact, Martineau used customer funds to finance his own unsuccessful options trading, for other personal uses and to make occasional ponzi-like payments to the investors.

The Complaint alleges that Martineau's conduct violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Martineau has agreed, without admitting or denying the Commission's allegations, to the entry of a permanent injunction. No civil monetary penalties were imposed based on sworn financial statements demonstrating a financial inability to pay. Additionally, Martineau has agreed to the entry of an administrative bar from associating with any broker or dealer.

Also today, the United States Attorney's Office for the District of Massachusetts announced that an information has been filed against Martineau containing criminal wire and mail fraud charges based upon essentially the same conduct alleged in the Commission's complaint. The Commission coordinated its investigation with the United States Attorney's Office and the Federal Bureau of Investigation.