News and Press Releases

FIFTH AND FINAL DEFENDANT PLEADS GUILTY IN
HOLMES HARBOR BOND FRAUD CASE

FOR IMMEDIATE RELEASE
May 5, 2005

EDWARD TEZAK, age 45, a patent attorney from Snohomish, Washington and Sheridan, Montana, entered a guilty plea yesterday in federal court in Seattle to wire fraud and money laundering. Four other defendants previously pled guilty in this case: Terry Martin, a developer, J. David Smith, an attorney, John White, a banker, and Leslie Killingsworth, an engineer for the Holmes Harbor Sewer District.

The case was originally indicted in August of 2003. Trial was delayed several times due to its size and complexity. Sentencing for TEZAK and three other defendants is scheduled to occur on June 17, 2005, before the Honorable United States District Judge Robert S. Lasnik.

This case arose from the issuance of $20 million in tax exempt municipal bonds by the Holmes Harbor Sewer District on Whidbey Island, Washington. A developer, Terry Martin, and his attorney, J. David Smith, persuaded the district to issue the bonds to build utilities, roads and drainage for a planned office park to be built near Paine Field, Everett, Washington. In connection with the bond issuance, Martin, Smith, John White, in his capacity as a banker, and Leslie Killingsworth, all made representations to the district and to bond purchasers concerning the underlying office project. Called the Silver Sound Corporate Center, they claimed it had been pre-leased to Microsoft and to a Texas company named R.A. King; that they had $63 million in committed loan funds to construct the facility and guarantee the bonds; they claimed Howard S. Wright Construction had a binding construction contract to build the facility; and they claimed permits were in place to begin construction upon issuance of the bonds. All of those representations, which were contained in the bond documents and relied upon by the broker dealers and about 250 investors, were fraudulent. There was no private financing, the construction contract was a forgery, there were no permits and there were no binding leases. In fact, Microsoft had no connection with the deal whatsoever.

EDWARD TEZAK joined the fraudulent conspiracy in about May of 2000. He provided a series of letters falsely claiming Goldman Sachs was prepared to lend the $63 million in private financing for the project through an entity TEZAK helped create named Goldman Sig. The claims about Goldman Sachs were false, there was no private financing, and TEZAK's creation of Goldman Sig merely furthered the illusion of a bona fide lender for the purpose of closing the bond transaction. TEZAK was paid $50,000 for his role in the scheme which he concealed in a sham charity called Air Medical Services. He used the purportedly charitable funds for jewelry, motorcycles, a truck and a horse trailer.

TEZAK faces a term of imprisonment of up to 27 months, a fine of $750,000, and 3 years of supervised release. This case was the product of a major investigation by the Seattle office of the FBI and the Seattle field office of the IRS, Criminal Investigation Division. The matter was referred for criminal prosecution by the Securities Exchange Commission in San Francisco.

Assistant U.S. Attorneys Floyd Short and Kurt Hermanns prosecuted the case. For further information please contact our Press Information Officer Emily Langlie at (206) 553-4110, or Mr. Short at (206) 553-7970, or Mr. Hermanns at (253) 428-3800.

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