2002-02-13 -- Marten, Sherwin and Judith -- Guilty Plea -- News Release

NEWARK - A New York couple pleaded guilty today to tax evasion and perjury charges arising out of their relationship with the collapsed Millburn securities brokerage firm First Interregional Equity Corp., U.S. Attorney Christopher J. Christie announced.

Sherwin Marten, 75, and his wife Judith Marten, 73, both of Old Westbury, N.Y., entered their pleas in U.S. District Court in Newark before Judge William G. Bassler.

According to the Informations to which they pleaded guilty, Sherwin and Judith Marten, who maintained a customer account at First Interregional Equity, received a portion of the profits made by the firm in selling securities and office equipment leases to investors - relatives, friends and acquaintances of the couple - referred to First Interregional by Sherwin Marten.

Judith Marten admitted that, in a joint tax return for herself and her husband filed with the IRS, Judith Marten knowingly omitted over $200,000 in equipment lease sale profits received by the Martens from First Interregional. Sherwin Marten admitted that, after the collapse of First Interregional in March 1997 - when Sherwin Marten was deposed by Trustees appointed by the Courts to investigate the failed brokerage firm - he knowingly provided false testimony regarding his referrals of investors to First Interregional.

Sherwin Marten pleaded guilty to a one-count Information charging him with making false declarations in proceedings ancillary to a United States Court, and Judith Marten pleaded guilty to a one-count Information charging her with attempting to evade and defeat taxes, according to Assistant U.S. Attorney Amy Winkelman.

The defendants each face a maximum prison sentence of five years, and a fine of up to $250,000.

According to Sherwin Marten's Information, he reached an agreement in 1989 with First Interregional, under which he and his wife would receive a portion of the profits made in selling bonds and other securities to investors he referred to the firm (the "referral investors"). Under that agreement, Sherwin Marten advised referral investors to purchase particular bonds and securities through his broker at First Interregional.

The securities which Sherwin Marten recommended to the referral investors had previously been purchased for his own First Interregional account (the "Marten securities"). When a referral investor purchased some of the Marten securities, First Interregional would purchase the securities from the Martens' account and resell them to the referral investor at a higher price than had been charged to the Martens, according to the Informations. The resulting profit would be shared between First Interregional and the Martens' account, according to the Informations.

Between about November 1989 and August 1995, investors referred by Sherwin Marten purchased from First Interregional hundreds of thousands of dollars in bonds and securities which had previously been held in the Martens' First Interregional account. The investors whom Sherwin Marten referred to First Interregional to purchase securities included friends, acquaintances and relatives of his and his wife. The Martens did not advise the referral investors that securities they were purchasing had previously been held in the Martens' First Interregional account, or that their purchases would result in a profit to the Martens.

In a similar scheme, in about 1993, Sherwin Marten reached an agreement with First Interregional under which the Martens would receive a portion of the profits made by a First Interregional affiliate, First Interregional Advisors Corp., in selling office equipment leases to investors referred to the firm by Sherwin Marten. During 1993 and 1994, investors referred by Sherwin Marten purchased millions of dollars in equipment leases from First Interregional. In order to provide the Martens with their share of the profits made from these lease sales, First Interregional issued checks to the Martens totaling more than $250,000.

The Martens admitted that, as with the securities scheme, they failed to advise the referral investors that their purchases of equipment leases would result in a profit to the Martens.

According to Judith Marten's Information, she filed a joint individual income tax return for herself and her husband for tax year 1994 in which she knowingly failed to report $216,743 in equipment lease sale profits the Martens had received that year from First Interregional.

On March 5, 1997, the First Interregional companies ceased business operations, and First Interregional Advisors Corp. filed for bankruptcy protection, leaving liabilities of over $100 million. The United States District Court and the Bankruptcy Court for the District of New Jersey appointed Trustees to investigate the conduct, assets, and liabilities of the First Interregional companies.

The charges state that as part of their investigation, the Trustees deposed Sherwin Marten. During the deposition, attorneys for the Trustees questioned Sherwin Marten, under oath, falsely denied that he had referred investors to First Interregional to purchase bonds, and also falsely denied knowing that bonds purchased for his own account were subsequently sold to his friends and acquaintances, resulting in a profit to him.

According to the Information to which he pleaded guilty, Sherwin Marten and his wife were subsequently sued by the First Interregional Trustees. The Martens later reached a settlement with the Trustees, and the Martens paid the Trustees $1.2 million.

Under U.S. Sentencing Guidelines, Judge Bassler will determine the defendants' actual sentences based upon a formula that takes into account the severity and characteristics of the offenses and the defendants' criminal histories, if any.

Parole has been abolished under the federal system. Under the Sentencing Guidelines, defendants who are given custodial terms must serve nearly all that time.

In the filing of a felony Information, a defendant waives the right to have his or her case presented to a federal Grand Jury and, instead, pleads guilty to charges presented by the Government.

Christie credited Special Agents of the FBI, under the direction of Kevin P. Donovan, Special Agent in Charge of the FBI in Newark, and Special Agents of the IRS Criminal Investigation section, under the direction of Special Agent in Charge Anne D. Fahy, with developing the case.

The Government is represented by Assistant U.S. Attorney Winkelman of the Fraud and Public Protection Division of the U.S. Attorney's Office in Newark.

Defense Counsel:

Sherwin Marten: Bruce R. Rosen, Esq.

Judith Marten: Scott Thompson, Esq.