The Mukilteo real estate developer who talked a small Island County sewer district into selling $20 million in municipal bonds for a commercial center pleaded guilty Thursday in U.S. District Court in Seattle to charges that could land him in prison for more than five years.
Terry R. Martin, 57, is scheduled to be sentenced Nov. 5 by Judge Robert Lasnik. The sentencing range agreed to by Martin and the government is five to eight years behind bars.
The scheme snared the tiny Holmes Harbor Sewer District on Whidbey Island, which agreed to sell $20 million in municipal bonds to fund Martin’s proposed Silver Sound Corporate Center near Paine Field in Everett.
There was no development, and about 200 investors were left without any chance of recouping their money.
In addition, the sewer district was warned in advance that the sale was illegal because the municipal bonds would be used for a project outside the boundaries of the district, which provides water and sewer for about 200 homes in Island County.
“It was not unexpected that he would do that,” said Seattle attorney David Hoff, one of the lawyers heading a class-action lawsuit against Martin and two companies. “The evidence is pretty clear, and it was not a mystery what happened in this case. There were misrepresentations and there was fraud.”
A civil trial against Martin and his corporations, Prudential Securities Inc. and Wedbush Morgan Securities Inc., is scheduled for March, Hoff said.
Martin pleaded guilty to conspiracy, nine counts of securities fraud and 10 counts each of wire fraud and money laundering.
Three other defendants have already pleaded guilty. They are attorney J. David Smith, 53, of Edmonds; Holmes Harbor engineer Leslie Killingsworth, 68; and John White, 52, a Lynnwood mortgage broker.
Edward Tezak of Sheridan, Mont., also was charged.
The government alleged the scheme centered on plans for Martin to build a 500,000-square-foot commercial office park. Martin convinced the elected sewer district commissioners to issue the $20 million in tax-exempt bonds to fund part of the development.
In his plea agreement, Martin admitted that he and others made numerous misrepresentations when promoting with the bond sale. His claims that the office space had been leased in advance to Microsoft also were false, the government said.
In addition, he told the commissioners that $63 million in private financing had been committed, when it had not, and he lied when he said that permits had been secured to begin construction.
Martin and the other defendants took more than $2.5 million from the bond funds for their personal use, according to court documents.
The case was investigated by the Seattle office of the FBI and the IRS.
“This case demonstrates our resolve to pursue the peddlers of bogus investment opportunities and other frauds,” said Timothy Marsh, acting special agent in charge of the IRS criminal investigation division in Seattle.
Reporter Jim Haley: 425-339-3447 or haley@heraldnet.com.
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