Litigation Release No. 19828 / September 12, 2006

SEC v. Dennis A. Martin, Civil Action File No. 1:06-CV-1078 (N.D. Ga.).

On September 11, 2006, the Honorable Timothy A. Batten, Sr., U. S. District Judge for the Northern District of Georgia, entered a final judgment by default against defendant Dennis A. Martin, a resident and registered representative of Marietta, Georgia.

The final judgment permanently enjoined Martin from future violations of 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. Martin was ordered to pay disgorgement, prejudgment interest and a civil penalty in the respective amounts of $5,130,835.21, $124,593.79 and $250,000. Martin was ordered to pay the above amounts within 10 business days from the entry of the final judgment.

The complaint alleged and the Court found that from February 2005 through May 2006, Martin recommended to many customers that they sell variable annuity contracts that they owned and within a short time purchase new variable annuity contracts with higher principal amounts. Martin also recommended that his customers invest the proceeds from the sale of their variable annuity contracts in a money market fund or in a closed-end fund for a short time prior to purchasing the new variable annuity contracts. Based on Martin's representations, the customers authorized the transactions; however, Martin did not invest the proceeds as authorized. Instead, Martin submitted forged documents to the variable annuity companies surrendering the contracts and directing those companies to mail the proceeds directly to him. Martin forged his customers' names on the checks and deposited them into a bank account in the name of First Financial Group, a fictitious name under which Martin conducted business. Additionally, Martin obtained some of the checks from customers for the purpose of purchasing securities. Martin misappropriated those funds, and used the funds to pay business and personal obligations. The Commission established and the Court found that Martin obtained in excess of $5 million in the scheme.

See also: L.R. 19691 / May 8, 2006.