U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20597 / May 23, 2008
Securities and Exchange Commission v. LandOak Securities, LLC; Patrick L. Martin; and Michael A. Atkins, Civil Action No. 3:08CV209 (EDTN May 22, 2008)
On May 22, 2008, the Securities and Exchange Commission ("Commission") filed a Complaint for Injunctive and Other Relief ("Complaint") in the United States District Court for the Eastern District of Tennessee against LandOak Securities, LLC ("LandOak Securities"); Patrick L. Martin ("Martin"); and Michael A. Atkins ("Atkins"). LandOak Securities is a registered investment adviser and broker-dealer based in Knoxville, Tennessee. Martin is an owner and associated person of LandOak Securities. Atkins is a former owner and associated person of LandOak Securities.
The Complaint alleges that between July 1997 and July 1998, Martin and Atkins offered and sold to investors approximately $3.6 million in promissory notes and membership interests in LandOak Mortgage, LLC ("LandOak Mortgage"), a Tennessee entity they founded and controlled. According to the Complaint, thirteen of the approximately thirty-five investors in LandOak Mortgage were also LandOak Securities advisory clients, who together invested a total of $1.8 million in LandOak Mortgage. As represented to investors at the time of the offering, LandOak Mortgage loaned the raised funds to LandOak Development, LLC ("LandOak Development"), another Tennessee entity partly owned by Martin and Atkins. According to the Complaint, LandOak Development used the funds to purchase and develop commercial property, again as represented to investors. The Complaint alleges that between July 2002 and January 2003, Martin and Atkins misappropriated over $2.8 million of funds due to LandOak Mortgage investors. Further, the Complaint alleges that Martin and LandOak Securities made false statements in LandOak Securities' Commission filings and failed to maintain certain required advisory books and records.
The Complaint alleges that the defendants have violated the antifraud provisions of Sections 204, 206(1), 206(2), 206(4), and 207 of the Investment Advisers Act of 1940 and Rules 204-2 and 206(4)-2 thereunder. The Complaint seeks an order granting the Commission's requests for (i) permanent injunctions against future violations; (ii) disgorgement of all ill gotten gains plus prejudgment interest; and (iii) imposition of civil penalties.