Carol C. Martino, et al.

Litigation Release No. 17532 / May 23, 2002

Court Freezes $2 Million Yacht Purchased by Defendant Carol C. Martino with Proceeds of Her Alleged Illegal Brokerage Activities

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

On May 21, 2002, U.S. District Judge Milton Pollack issued an order against defendant Carol C. Martino and her husband, relief defendant Gerard Haryman, freezing Martino's $2 million yacht, pending the outcome of the Commission's civil enforcement action against Martino. The Court entered the order following a hearing on the matter held earlier that day.

The Commission sued Martino and her stock brokerage firm in May 1998 for repeated violations of a 1992 Commission order that barred Martino from acting as a stock broker. The Commission alleges that, from 1992 through 1995, Martino brokered millions of dollars in sales of stock by U.S. companies to foreign purchasers and, thus, accumulated millions of dollars in illegal brokerage commissions and fees. The Commission seeks disgorgement of Martino's ill-gotten gains, as well as monetary penalties and other relief.

The Commission recently learned that Martino used some of her illegal brokerage revenues to purchase a $2 million yacht, and that she and her husband have been attempting to sell the yacht to pay personal expenses (including a mortgage on their Palm Beach, Florida home). Consequently, the Commission requested an emergency freeze from the Court.

In the freeze order, Judge Pollack determined that (1) the Commission presented sufficient evidence for the Court to infer for present purposes that Martino and her brokerage company "illegally brokered millions of dollars of stock sales," and that "Martino thus accumulated millions of dollars in illegal brokerage fees and commissions"; (2) in November 1997, Martino used at least $1.28 million of her illegal brokerage revenues to purchase a $2 million seventy-five foot motor yacht called "Je T'aime"; (3) in December 1997, Martino and Haryman registered the yacht in the British Virgin Islands in the name of "JTM Limited" - an offshore corporation wholly owned and controlled by Haryman - "to hide Martino's assets from her creditors and potential creditors, including the Commission"; and (4) the Commission made an adequate showing that "Martino owns the Yacht, seeks to maintain it beyond the court's jurisdiction, and seeks to sell the Yacht and dissipate the sale proceeds for her and Haryman's personal benefit."

The freeze order requires Martino and Haryman, pending final judgment in the case, to "hold and retain the Yacht within their control and within the territorial waters of the United States" and otherwise to maintain the present value of the yacht for the purpose of paying any judgment the Commission obtains against Martino and/or her brokerage firm.

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 brokerage revenue that is at issue in the Commission's civil enforcement action against her. In April 2002, Martino received a twenty-eight month sentence, which she is currently serving in federal prison in Florida.