SEATTLE — A Lynnwood mortgage broker pleaded guilty Tuesday in U.S. District Court to conspiracy to commit securities fraud and other charges related to a scheme to get a small sewer district in Island County to issue tax-exempt bonds for building a private office complex in Everett.
John White, 52, was one of four people indicted in August for fraud and misuse of $20 million in bonds issued by tiny Holmes Harbor Sewer District on south Whidbey Island.
He probably will be sentenced after the three co-defendants are tried. That trial is scheduled to start June 7.
White faces a maximum penalty of five years in prison and a $250,000 fine, the U.S. Attorney’s Office in Seattle said.
Mukilteo developer Terry Martin allegedly was behind the scheme to convince the sewer district to issue the tax-exempt municipal bonds to assist in a development called Silver Sound Corporate Center, planned for 40 acres near the Boeing Co. plant in south Everett.
In his guilty plea, White admitted to falsely representing that there were binding loan commitments of $63 million. He also admitted making such representations both in letters and what are purported to be loan documents, federal attorneys said.
In addition, White admitted knowing at the time the bonds were issued in October 2000 that Martin had no intention of completing the project. Bond repayment depended on the project being completed and leased.
The indictment also alleges that no construction contract existed, claims that the project’s office space had been pre-leased were false, the project’s value had been overstated, and participants claimed the city of Everett had issued building permits when it had not.
The bonds were sold to develop the 547,000-square-foot business park some 15 miles and a ferry ride away from the 250-household sewer jurisdiction. District commissioners had been warned repeatedly not to create an improvement district outside Holmes Harbor’s boundaries, but proceeded anyway.
Besides White and Martin, Edmonds lawyer J. David Smith and Edward L. Tezak of Sheridan, Mont., are charged.
In addition, the federal government and investors have filed civil lawsuits against the four and others.
The case has been ongoing in Island County Superior Court, where a judge last year ruled that the sale of the bonds was illegal. Some 200 investors purchased the bonds.
Reporter Jim Haley: 425-339-3447 or haley@heraldnet.com.
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