After investigating out of the public eye for more than two years, the U.S. Securities and Exchange Commission is taking more than half a dozen people to court for their role in the illegal sale of $20 million in bonds by the Holmes Harbor Sewer District in 2000.

Last week, the SEC and the U.S. Attorney’s Office filed charges against a developer, attorneys, and securities officials involved in the deal, leaving little doubt that the sale was a blatant attempt to defraud investors.

Among those going to court will be Mukilteo developer Terry Martin, who — according to the SEC and U.S. Department of Justice — made a number of false claims to convince sewer district commissioners to sell $20 million in municipal bonds on his behalf. Those bonds were to be used to build drainage infrastructure for an office complex in Everett, known as the Silver Sound Corporate Center.

But since the bonds were sold in October 2000, no construction has taken place and the bonds have gone into default as both the Washington State Auditor’s Office and Island County Superior Court have declared the bond sale illegal.

In the charges filed by the U.S. Attorney’s Office, Martin is accused of using bond proceeds to buy land for his private development against the terms of the bond sale and of falsely claiming that his project had the backing of the investment company Goldman Sachs. He is also accused of lying about the existence of $65 million in private investment money for construction, and about the potential for a long-term lease agreement for his completed office complex.

As it turns out, the only lessee Martin had on the hook at the time of the bond sale was a company with six employees. In its press release describing the charges, the U.S. Attorney’s Office notes that this company could not have made lease payments adequate to pay off the bonds issued by the sewer district.

In addition, the U.S. Attorney’s Office has leveled 20 counts of criminal conspiracy against Martin, Martin attorney J. David Smith, mortgage broker John H. White and Edward Tezak, who was involved in arranging financing for the office complex project.

The SEC is also taking civil court action, charging Martin, attorneys Charles Tull and Mike McCall, and securities traders Kenneth Martin and George Tamura with violating the U.S. Securities Act of 1933.

While the charges came suddenly last week, they did not catch members of the Holmes Harbor Sewer District board of commissioners off guard. Stan Walker, president of the board, said since the district was so involved in the SEC investigation, it has been getting information about the charges as they formed.

But, he said, that does not diminish the importance of the announcement.

“I think it clearly indicates the district is the victim of a conspiracy,” he said this week.

Also laid out in the SEC investigation is how about half the bond money disappeared with days of the bond sale. The SEC found $355,000 in previously undisclosed payments going to attorneys McCall and Tull, Tezak and bond broker Ibis Securities.

The charges do not fault the district or its former commissioners for the bond sale.

Floyd Short, the assistant U.S. Attorney in charge of the Holmes Harbor case, could not be reached by press time for comment on when the case might go to trial.

Meanwhile, a class action suit against the sewer district and a number of other parties involved in the bond sale is scheduled to start trial in Island County Superior Court on Sept. 30. The suit was brought by bond investors, who are seeking to recover their investments plus interest and court costs.