National Investment Enterprises and Michael Garian
Litigation Release No. 17974 / February 7, 2003
SECURITIES AND EXCHANGE COMMISSION v. NATIONAL INVESTMENT ENTERPRISES AND MICHAEL GARIAN A/K/A MELKON GHARAKHANIAN A/K/A BIKA BALIAN, Civil Action No. (CV 03-0896 GHK (JWJx)) (C.D. Cal.)
The Securities and Exchange Commission filed a complaint in U.S. District Court in Los Angeles yesterday alleging securities fraud perpetrated primarily against Armenian-Americans by Michael Garian, also known as Melkon Gharakhanian, and his company, National Investment Enterprises ("NIE").
The SEC's complaint alleges that between 1997 and mid-2001, Garian, 41, of Van Nuys, California, and Glendale-based NIE raised over $19 million from about 200 investors. Most of the investors Garian and NIE targeted were residents of Glendale's large Armenian-American community, many of whom had never invested in the stock market, and some of whom were Armenian immigrants for whom English was a second language. Garian allegedly falsely told investors that he would use their money to purchase various securities for their accounts; had an "inside line" to upcoming "hot" IPOs, particularly for Internet and other technology-related companies; and could deliver large profits quickly. The complaint charges that Garian and NIE furthered their scheme by sending investors false monthly account statements that represented that NIE was purchasing large volumes of IPO shares and other securities on their behalf and making large profits from Garian's trading activities.
In fact, Garian invested only $5.2 million of the $19 million he raised, of which Garian lost all but $1.6 million in IPO investments, day trading, and commodities trading. The bulk of the investors' funds, $14 million, was used to repay earlier investors their principal and purported investment returns in order to sustain a Ponzi-like scheme. Garian used at least $112,000 for his own personal benefit, and an additional $2.3 million was withdrawn from NIE's bank account in the form of cashier's checks which remain unaccounted for, the complaint alleges. NIE's investors ultimately sustained a loss of approximately $5 million.
Concurrent with the filing of its complaint against Garian and NIE, the SEC also announced that it reached a settlement with relief defendant Aegis Financial, LLC, a Chicago-based commodities broker. The SEC did not charge Aegis with securities law violations, but instead named it as a relief defendant in order to require Aegis to return $210,000 of investors' funds that had been loaned by Garian and NIE. Aegis promised to deposit the $210,000 into the Court's registry.
The SEC's complaint alleges that Garian's and NIE's conduct violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10b of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940, and that NIE separately violated Section 7(a) of the Investment Company Act of 1940. The SEC's complaint asks the Court to permanently enjoin Garian and NIE from future violations of the foregoing registration and antifraud provisions, order Garian and NIE to disgorge, with prejudgment interest, all ill-gotten gains; and order Garian to pay a civil penalty.
[SEC v. National Investment Enterprises and Michael Garian a/k/a Melkon Gharakhanian a/k/a Bika Balian, Civil Action No. (CV 03-0896 GHK (JWJx)) (C.D. Cal)].
