Judge Certifies Class Action Status On Investor Lawsuit Against Prudential Securities, Inc., and Wedbush Morgan Securities, Inc., Announces Tousley Brain Stephens, LLC.

Business Editors & Legal Writers

SEATTLE--(BUSINESS WIRE)--Dec. 3, 2002

Investors allegedly misled in a local bond offering can now join a lawsuit filed against a Whidbey Island sewer district and organizers of an illegal multi-million dollar bond issue.

The investors, some of whom bought millions of dollars of the bonds, hope to recoup their losses through a newly sanctioned class-action lawsuit. Late yesterday, Superior Court Judge Alan Hancock issued an opinion allowing all investors who purchased the bonds to join a lawsuit initially brought by two Seattle area investors.

The bond offering was put together by the Holmes Harbor Sewer District, a small California investment firm, and developer Terry Martin of Mukilteo, who allegedly convinced the sewer district commissioners to sell $20 million in municipal bonds to help him develop a six-building office complex in Everett, outside the sewer district boundaries. Prudential Securities, Inc., sold more than 80% of the bonds. Wedbush Morgan securities, another broker-dealer, sold more than $1 million of the bonds. Both profited from the bond sale.

According to Seattle attorney Janissa Strabuk, "Hundreds of investors now hold bonds that are worthless. The securities firms who sold the bonds and made their profits did not do their required due diligence, and they became partners in this fraudulent scheme. Now, the securities firms who sold these fraudulent bonds have an obligation to their clients who were misled."

The State Auditor's Office and the State Attorney General found the bonds to be illegal because, among other reasons, according to state law it is illegal for sewer districts to issue bonds for projects outside their own boundaries. The Everett land involved in the scheme is another county, some 15 miles and a ferry ride, away from the sewer district. In addition, construction permits were not secured from the City of Everett, and the general contractor's contract was not-yet finalized, though documents issued along with the bonds state otherwise. In fact, the sewer commissioners authorized the bond sale, even though their own attorney, Mark Hansen, told them it was illegal.

Should the sewer district default on the bonds, it will be the largest bond failure in the state of Washington since the WPPSS debacle.

Bob Trimble (Whidbey Island resident, invested $4 Million), as well as smaller investors, will join attorneys in fielding questions from the media at today's Press Conference, to be held at 11AM at the law offices of Tousley Brain & Stephens, LLC, 700 5th Avenue, Suite 5600, Seattle.