A key player in a local bond scheme has admitted in court documents that he knew that $20 million in bonds issued by Holmes Harbor Sewer District were being sold based on falsified documents. John White, who served as the mortgage broker for the bond scheme, also admitted he knew that the project the bonds were issued to support would never be built.

White, 52, of Lynnwood, pleaded guilty last week in U.S. District Court to conspiracy to commit securities fraud and wire fraud. As a mortgage broker, he helped convince the sewer district to issue public bonds for the sewer infrastructure of a proposed office complex to be built in Everett.

The developer of the project, Terry R. Martin, of Mukilteo, was one of four people indicted in August and charged with conspiring to fraudulently acquire municipal bonds through the Holmes Harbor Sewer District and then sell the bonds under false pretenses to more than 200 investors. Also indicted by the U.S. Attorney’s Office in Seattle were White and attorneys J. David Smith and Edward Tezak.

In September of 2000, a month before the sewer district issued the illegal bonds, White alleges that Martin told him he did not plan to build project. Instead, White alleges, Martin told him that he would use bond proceeds to install public infrastructure and utilities and then sell the property to pay off the bond holders.

The Holmes Harbor Sewer District board and more than 200 investors who purchased the bonds were told, however, that leases from full occupancy of the 500,000 square feet of planned office space would be used to repay the debt.

“I think this is further evidence that the district was a victim of a conspiracy,” said Stan Walker, president of the sewer district’s board of trustees. “That’s a pretty startling revelation.”

“It shows it was a total con job on Martin’s part and all the people associated with him,” Walker said.

Some investors purchased more than $1 million each of the high-interest bonds, which became worthless after the issuance was declared illegal by a superior court judge. According to the the State Auditor’s Office and backed up by the courts, the sewer district did not have the authority to issue bonds and commit local taxpayers for a project outside its district borders.

In his plea agreement, White admitted that he intentionally misled the board into believing the office complex was well-funded and that binding loan commitments were in place.

White was vice-president of Signal Mortgage, Inc., in Everett at the time the sewer district was wooed into issuing the bonds. He wrote a series of letters on the letterhead of Signal Mortgage confirming that as much as $63 million in loan funds were committed to finance Martin’s development, known as Silver Sound Corporate Center.

“Those letters were false and fraudulent,” the plea agreement stated. “Neither Signal Mortgage nor any prospective lender Mr. White contacted, committed to lending Mr. Martin funds.”

He later falsified a construction loan for the $63 million and another document that guaranteed $20.5 million to pay off the municipal bonds in case of default.

White purportedly hid his involvement with Martin from his firm. He later started his own mortgage company, Goldman Sig, Inc., with himself as president, and reissued similar agreements on his new letterhead.

On October 25, 2000, White attended the Holmes Harbor Sewer District meeting at which the board voted to issue the bonds. At that time, knowing his documents were fraudulent, White stood behind his promise that loan construction funds were in place and the bonds were backed up with a $20 million guarantee.

White faces a maximum sentence of five years imprisonment and $250,000 in fines, as well as supervised release and restitution. He will be sentenced after the trial for the other three defendants is concluded. That trial is scheduled for June 7.