UNITED STATES OF AMERICA BEFORE THE SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT 0F 1933 Release No. 7485 / December 11, 1997 SECURITIES EXCHANGE ACT OF 1934 Release No. 39425 / December 11, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9504 ____________________________________ : In the Matter of : ORDER INSTITUTING PUBLIC : ADMINISTRATIVE PROCEEDINGS, MICHAEL GRABER, : MAKING FINDINGS AND IMPOSING : REMEDIAL SANCTIONS PURSUANT Respondent. : TO SECTION 8A OF THE SECURITIES : ACT OF 1933 AND SECTIONS 15(b), : 19(h) AND 21C OF THE SECURITIES : EXCHANGE ACT OF 1934 : I. The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest to institute this administrative proceeding pursuant to Section 8A of the Securities Act of 1933 ( Securities Act ) and Sections 15(b), 19(h) and 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against Michael Graber ("Graber") to determine whether he violated Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. II. In anticipation of the institution of these proceedings, Graber has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or to which the Commission is a party, and without admitting or denying the Commission's findings or conclusions contained herein, except as to the Commission's finding of jurisdiction over him and the subject matter, which are admitted, Graber consents to the entry of this Order Instituting Public Administrative Proceedings, Making Findings and Imposing Remedial Sanctions Pursuant to Section 8A of the Securities Act of 1933 and Sections 15(b), 19(h) and 21C of the Securities and Exchange Act of 1934 (the Order ). ======END OF PAGE 1====== III. On the basis of this Order and Graber s Offer, the Commission finds <(1)> that: A. SUMMARY From mid-1992 through mid-1993, a Los Angeles boiler room operation named InterLink Data Network of Los Angeles, Inc. ("InterLink Data") fraudulently sold at least $12 million of unregistered securities of InterLink Data and of two related limited partnerships (collectively, the "InterLink securities") to over 450 customers nationwide. InterLink Data was established ostensibly to develop private, fully integrated telecommunication networks and video phone systems. In fact, InterLink had no business operations and existed only to sell worthless securities. B. RESPONDENT Michael Graber, age 59, resides in Los Angeles, California. Between September 1992 until March 27, 1993, he was a registered representative of Portfolio Asset Management/USA Financial Group, Inc. ( PAM ), a broker- dealer registered with the Commission. C. FACTS 1. The InterLink Fraud In or around July 1992, PAM entered a selling agreement with InterLink Data and began serving as the underwriter of the unregistered securities distributions of InterLink Data and its two limited partnerships, InterLink Fiber Optic Partners L.P. ( InterLink Fiber ) and InterLink Video Phone Partners L.P. ( InterLink Video ). On November 15, 1993, the Commission obtained final judgments against InterLink Data, its principal, Michael Gartner, InterLink Fiber and InterLink Video which permanently enjoined them from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. SEC v. InterLink Data Network of Los Angeles, Inc., InterLink Fiber Optic Partners L.P., InterLink Video Phone Partners L.P., and Michael Gartner, Civ. No. 93-3073 R (C.D. Calif.). The Findings of Fact and Conclusions of Law in that case found that the defendants sold over $12 million of InterLink securities through boiler rooms to approximately 450 investors nationwide by making various fraudulent statements. 2. Graber's Participation in the InterLink Fraud Graber sold InterLink Data's unregistered securities through the use of material misrepresentations and raised approximately $245,000 from <(1)>/ The findings herein are made pursuant to Graber s Offer and are not binding on any other person or entity named as a respondent in this or any other proceedings. ======END OF PAGE 2====== approximately eleven investors. As a result of his sales efforts Graber received at least $25,050 in compensation from InterLink. He participated in InterLink Data's fraudulent sales operation by making representations to investors that he knew or should have known were materially false and misleading and by distributing offering materials to investors which he knew or should have known contained material misrepresentations and omissions. Graber offered and sold such securities by making, among others, the following materially false and misleading representations: (a) that InterLink Data owned sixteen patents or exclusive licenses on technology critical to developing a fiber optic network; (b) that InterLink Data was currently installing fiber optic cable; (c) that InterLink Data's common stock would become publicly traded, when no efforts had been undertaken to list the stock for such trading; (d) that investors would receive high returns on their investments, when such statements lacked any reasonable basis in fact; and (e) that InterLink would use proceeds raised from securities sales to develop a fiber optic network. Graber also: (a) failed to disclose that interest payments to investors derived from other investor proceeds; (b) minimized the risk of investing in a start-up company with no revenues or business operations other than sales of securities; and (c) made projections of future business operations which lacked any reasonable basis in fact. Graber knew that InterLink Data claimed that its securities distributions were exempt from registration with the Commission pursuant to securities registration exemptions contained in Regulation D under the Securities Act. However, he disregarded the requirements of those exemptions by soliciting unaccredited investors nationwide through cold calls and cable television and radio advertisements. IV. In view of the foregoing, the Commission finds that Graber willfully violated Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. V. ORDER ======END OF PAGE 3====== Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Graber and impose the sanctions that are consented to in that Offer. Accordingly, IT IS HEREBY ORDERED: A. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, that Graber cease and desist from committing or causing any violation and any future violation of Sections 5(a), 5(c) and 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; B. Pursuant to Section 15(b)(6) of the Exchange Act, that Graber be barred from association with any broker, dealer, investment adviser, investment company or municipal securities dealer, with the right to reapply for association after five years to the appropriate self-regulatory organization or, if there is none, to the Commission; and C. Pursuant to Sections 21B and 21C of the Exchange Act, that Graber shall within 21 days of the entry of the Order, pay disgorgement of $25,050, civil penalties of $10,000, and pre-judgment interest of $9,505, for a total amount of $44,555 to the United States Treasury. Such payment shall be: (a) made by United States postal money order, certified check, bank cashier s check or bank money order; (b) made payable to the Securities and Exchange Commission; (c) hand-delivered or delivered by certified mail (return receipt requested) to the Comptroller, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC, 20549; and (d) submitted under cover letter that identifies Michael Graber as a Respondent in these proceedings, ======END OF PAGE 4====== the file number of these proceedings, a copy of which cover letter and money order or check shall be sent to Daniel A. Nathan, Assistant Director, Division of Enforcement, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC, 20549. By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 5======