United States District Court, D. Maryland, Southern Division
J. HAZEL UNITED STATES DISTRICT JUDGE
Securities and Exchange Commission (“SEC”) moves
for summary judgment against the remaining Defendants in this
civil enforcement action: Michael K. Martin, his company
Capital Source Lending, LLC (“CSL”), Thomas
Vetter, and Relief Defendants Charel Winston and Goodwill
Funding, Inc. (“Goodwill”). Martin, who is
currently incarcerated, was not served the Motion for Summary
Judgment at the location of his incarceration until January
15, 2019. ECF No. 385. On February 13, the Court granted
Martin's first Motion for Extension of Time to file a
response. ECF No. 388. On March 12, he filed a second Motion
for Extension of Time and also sought to Compel Production of
Documents. ECF No. 389. On March 29, the Motion was granted
in part and denied in part, and Martin was given thirty days
to file a response. ECF No. 391. To date, neither Martin nor
CSL has filed a response.
Vetter, proceeding pro se, filed an Opposition and
Cross-motion for Summary Judgment. ECF No. 374. Defendant
Winston, also proceeding pro se, filed an Opposition
to the SEC's Motion for Summary Judgment, purportedly on
behalf of herself and Goodwill Funding, Inc. ECF No. 376.
However, that Opposition will only be considered as to
Winston, as corporations may only file motions when
represented by counsel. See Loc. R. 101.1(a) (D. Md.
2016) (“Individuals who are parties in civil cases may
only represent themselves.”). The SEC has also filed an
unopposed Motion for Judgment as to Defendants North Star
Finance, LLC (“North Star”), Thomas Ellis, and
Yasuo Oda. ECF No. 365. No. hearing is necessary. Loc. R.
105.6. For the following reasons, Plaintiff's Motion for
Summary Judgment, ECF No. 361, is granted in part and denied
in part. Defendant Vetter's Motion for Summary Judgment,
ECF No. 374, is granted in part and denied in part.
Plaintiff's Motion for Judgment, ECF No. 365, is granted.
Martin is the registered agent of CSL, a limited liability
company based in Virginia Beach, VA, with its principal
office at Martin's home address. ECF No. 363 ¶¶
18, 19. Martin has controlled CSL, which promoted
transactions involving bank instruments and
“monetizing” services since at least 2013.
Id. ¶¶ 19, 36. From January 2013 to May
2015, Martin, CSL, and two other companies controlled by
Martin obtained approximately $4, 163, 910.28 in deposits
from at least 34 investors in connection with bank instrument
transactions. Id. ¶ 45. In these transactions,
Martin and CSL told investors that they could obtain and
monetize bank guarantees, standby letters of credit, and
other bank instruments. Id. ¶ 49.
pled guilty and was convicted of conspiracy to commit wire
fraud in March 2018. Id. ¶ 38. As part of this
guilty plea, Martin admitted to at least three fraudulent
investment schemes from mid-2013 through 2015. Id.
¶¶ 38-44. In the first scheme, he admitted to
knowingly and willfully conspiring with a third party on a
scheme to falsely and fraudulently solicit payments from
individuals in exchange for access to blocked bank accounts
that would return 1000% on their investments within
approximately thirty days. ECF No. 364-10 at
38-39.Martin admitted to knowingly falsifying
letters on bank letterhead that purported to confirm the
existence of these accounts, and to having obtained funds
from the victims of this scheme. Id. at 38.
second scheme, Martin admitted that he falsely represented to
a member of the board of a charter school that, upon the
transfer of $400, 000, he would obtain and monetize a bank
instrument which would result in a payout of no less than
€105, 000, 000. Id. at 45-46. Martin admitted
that he did not use the $400, 000 to monetize a bank
instrument and did not pay out any funds to the board member;
instead, he used $182, 000 of the transferred funds to pay
personal living expenses. Id. at 46-47.
also admitted to the accuracy of the plea agreement as to the
third fraudulent scheme, in which he worked with North Star,
Ellis, and Oda after they failed to obtain financing for
construction projects for members of the National Association
of Home Builders (“NAHB”). ECF No. 364-9 at 6.
Martin admitted that he promised the members that in exchange
for a “participation fee, ” he would obtain and
monetize a bank guarantee to generate funds that North Star
would loan to members for their construction projects.
Id. For example, one member of NAHB declared that he
was told to send $75, 000 to an escrow account that Martin
would use to acquire a bank instrument that would generate
$4.8 million in funds. ECF No. 5-43 ¶¶ 15-16. These
funds would then be loaned to the NAHB member on favorable
terms to be used for a real estate project. Id.
¶ 16. Six months later, after myriad inquiries by the
NAHB member and just as many false reassurances by Martin and
Ellis that the money was forthcoming, Martin agreed to refund
$60, 000 of the $75, 000. Id. ¶ 29. Martin
explained that he was keeping the other $15, 000 because he
was ready to fund the transaction and accused the NAHB member
of backing out of the agreement. Id.
SEC, through expert testimony, has asserted that investments
of this kind do not exist, and no defendant has offered any
evidence to the contrary. See ECF No. 363
¶¶ 26-29. Indeed, despite his continued promises to
the victims of his scheme that he could acquire and monetize
bank guarantees, Martin repeatedly admitted at his deposition
that he does not fully understand what a bank guarantee is or
how it would or could be monetized. See ECF No.
364-2 at 15, 16, 25, 26, 27.
Vetter was a member of NAHB's Board of Directors. ECF No.
363 ¶ 15. He began acting as a consultant for North Star
in November 2013. ECF Nos. 374 ¶¶ 6-8, 363 ¶
83. The consulting agreement stated that Vetter was to be
paid “$5, 000 per project upon signing of Term sheet
with Company and Builder Client.” ECF No. 364-15 at 10.
On at least a few occasions, he was paid one-third of the
fees each builder paid to North Star. See ECF No.
364-1 at 82-83. Vetter introduced Ellis and North Star to the
NAHB builders at its annual meeting in Las Vegas, Nevada in
February 2014. ECF No. 87 ¶¶ 28-30. At this
meeting, Ellis pitched NAHB members on a “100% debt
financing” opportunity requiring a “$30, 000
refundable Earnest Money and processing fee deposit.”
ECF No. 374-9 at 3, 7. Though a disclaimer was read following
the presentation stating that the presentation was “for
the builders (sic) information only, ” in the two
months following the presentation, at least 12 NAHB members
applied for the program. ECF No. 87 ¶ 30-31. Vetter
helped facilitate these applications, having followed up with
attendees who expressed interest with additional details and
acting as the “front person” for Ellis with NAHB
members. ECF No. 363 ¶¶ 91-92.
admitted that he was initially “extremely skeptical of
this 100 percent financing, ” and attempted to research
Ellis but found little except for a red flag on a website
called “Ripoff Report” that he claims he later
discovered was an “extortion website.” ECF No.
364-1 at 18-19. Vetter claims he was reassured by the fact
that North Star was working with Citywide Lending Group, an
entity that claimed to be a broker registered with the SEC.
See ECF No. 374-10 at 6-9. Ellis had also provided
him with a newspaper article describing a project that Ellis
claimed to have funded. ECF No. 364-1 at 37. Vetter
unsuccessfully attempted to follow up with anyone associated
with the project to verify Ellis' involvement.
Id. In February 2014, a builder expressed concern
about Ellis' refusal to provide references, and Vetter
wrote to Ellis telling him to “[s]ay you are hamstrung
because of the attorney's recommendation, and that it is
out of your hands.” ECF No. 364-1 at 151. At his
deposition, Vetter did not recall sending this email and was
unable to explain to what attorney recommendation he was
referring. Id. at 43-44.
contends that, after funding failed to materialize for any of
his builders, he resigned from his consulting agreement with
North Star on June 1, 2014. ECF No. 374-10 at 3. But in his
deposition he explained, in reference to a June 19, 2014
email that he received naming him as responsible for
“educat[ing] the borrower, ” that he had been
“front person” as part of his consulting role.
ECF No. 364-1 at 53. Vetter consistently emphasized that his
role was not to explain the loan structure, but rather to
pass along information on the loan structure created by
Ellis. Id. Despite his supposed resignation, Vetter
continued to send and receive program-related emails. On July
9, 2014, he proposed to Ellis that “[o]nce we get the
first funding . . . lets go over all builders in the closing
pipeline and pick the ones we want to continue to do business
with and offer them the first slots for new project funding
to them.” Id. at 169. On September 24, 2014,
Ellis sent an email to Vetter, Oda, and another North Star
employee announcing a new loan program in which the
applicants “do not pay back the loan.”
Id. at 176. In this email, Ellis asked Vetter to put
the descriptions onto the North Star website, and Vetter did
so. Id; id. at 67-68. Vetter testified that
no one attempted to apply for this new program. Id.
also continued to communicate with NAHB members, passing
along updates on the status of their applications. On October
24, 2014, he informed one member that the bank guarantee
purchases had been completed, and only a final signature was
required to conclude the transactions. ECF No. 364-1 at 194.
By November 25, 2014, when the project still had not closed,
Vetter emailed the member to say that “It is not as if
they are deliberately delaying the process. Mike [Martin] has
$3.5 million of his own money in this and I am sure he wants
it Reimbursed (sic).” Id. at 197. Vetter
further explained that he did not get paid until the projects
close-a claim he was later unable to explain. Id. He
sent similar emails to other NAHB members inquiring about the
status of their projects. Id. at 200-05.
part, Vetter also challenges the SEC investigation as based
on the suborned testimony of Andy Hutchison, one of the
builders who applied for a loan from North Star. See
ECF No. 374 ¶¶ 9-21. Vetter's allegation of
suborned testimony is based on edits made to Hutchison's
declaration by an SEC attorney. See ECF No. 374-6.
STANDARD OF REVIEW
Fed.R.Civ.P. 56, summary judgment is appropriate only when
the Court, viewing the record as a whole and in the light
most favorable to the nonmoving party, determines that there
exists no genuine issue of material fact and the moving party
is entitled to judgment as a matter of law. See Celotex
Corp. v. Catrett, 477 U.S. 317, 322-24 (1986). The
burden is on the moving party to demonstrate that there
exists no genuine dispute of material fact. See Pulliam
Inv. Co. v. Cameo Props., 810 F.2d 1282, 1286 (4th Cir.
1987). To defeat the motion, the nonmoving party must submit
evidence showing facts sufficient for a fair-minded jury to
reasonably return a verdict for that party. See Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
Additionally, a party must be set forth admissible facts in
order for them to be considered in support of or opposition
to a motion for summary judgment. See Williams v. Silver
Spring Volunteer Fire Dep't, 86 F.Supp. 398, 407 (D.
for summary judgment require that the Court consider
“each motion separately on its own merits to determine
whether either of the parties deserves judgment as a matter
of law.” Rossignol v. Voorhaar, 316 F.3d 516,
523 (4th Cir. 2003). “The Court must deny both motions
if it finds a genuine issue of material fact, ‘but if
there is no genuine issue and one or the other party is
entitled to prevail as a matter of law, the court will render
judgment.'” Wallace v. Paulos, No. DKC
2008-0251, 2009 WL 3216622, at *4 (D. Md. 2009) (citation
district court is obligated to thoroughly analyze an
unopposed motion for summary judgment to determine whether
the moving party is entitled to summary judgment as a matter
of law. See Maryland v. Universal Elections, Inc.,
729 F.3d 370, 380 (4th Cir. 2013). “Although the
failure of a party to respond to a summary judgment motion
may leave uncontroverted those facts established by the
motion, the district court must still proceed with the facts
it has before it.” Robinson v. Wix Filtration
Corp., 599 F.3d 403, 409 n.8 (4th Cir. 2010) (internal
contends that Defendants Martin and CSL violated Section
17(a) of the Securities Act, 15 U.S.C.A. § 77q(a);
Section 10(b) of the Exchange Act, 15 U.S.C.A. § 78j(b),
and Rule 10b-5 promulgated thereunder, 17 C.F.R. §
240.10b-5; Sections 5(a) and 5(c) of the Securities Act, 15
U.S.C. §§ 77e(a), (c); and Section 15(a) of the
Exchange Act, 15 U.S.C. § 78o(a)(1).
alleges that Defendant Vetter violated Section 20(e) of the
Exchange Act, 15 U.S.C. § 78t(e). Plaintiff also argues
that Defendant Vetter violated Section 15(a) of the Exchange
Act, 15 U.S.C. § 78o(a)(1).
these violations, Plaintiff asks the Court both to enjoin
Defendants from future violations of the Securities Laws and
to disgorge all benefits Defendants have derived from their
misconduct. Finally, Plaintiff seeks civil monetary penalties
from all Defendants. Plaintiff also asserts that Relief
Defendants Winston and Goodwill ...