UNITED STATES OF AMERICA BEFORE THE SECURITIES AND EXCHANGE COMMISSION SECURITIES ACT OF 1933 Release No. 7488 / December 11, 1997 SECURITIES EXCHANGE ACT OF 1934 Release No. 39428 / December 11, 1997 ADMINISTRATIVE PROCEEDING File No. 3-9507 ____________________________________ : In the Matter of : ORDER INSTITUTING PUBLIC : ADMINISTRATIVE PROCEEDINGS, ANTHONY LOLLIS, : 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 Anthony Lollis ("Lollis") 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, Lollis 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, Lollis 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 ). III. FACTS ======END OF PAGE 1====== On the basis of this Order and Lollis s Offer, the Commission finds <(1)> that: A. SUMMARY In or around July 1992, Portfolio Asset Management/USA Financial Group, Inc. ( PAM ), a broker-dealer registered with the Commission, entered a selling agreement with InterLink Data Network of Los Angeles, Inc. ( 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. B. RESPONDENT Anthony Lollis, age 39, resides in Rancho Palos Verdes, California. Between August 5, 1992, and May 1, 1993, Lollis was vice president of InterLink Data Network. C. FACTS 1. PAM and the InterLink Fraud In approximately June 1992, PAM signed a selling agreement with InterLink Data to serve as the underwriter of the unregistered securities distributions of InterLink Data and its two limited partnerships, InterLink Fiber and 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 <(1)>/ The findings herein are made pursuant to Lollis 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====== 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. Lollis's Participation in the InterLink Fraud Lollis and Gartner established and managed three boiler rooms affiliated with PAM from which the unregistered InterLink securities were distributed. Lollis offered and sold InterLink Data's common stock by making representations and by distributing offering materials to investors that he knew or was reckless in not knowing were materially false and misleading. As a supervisor of the sales force Lollis conveyed information to the brokers concerning InterLink's progress that he knew or was reckless in not knowing was false and thereby caused them to make misrepresentations to investors. Lollis made and caused the brokers to make the following materially false and misleading representations to investors: 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. Lollis, and the brokers under his supervision, 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. Lollis knew that the InterLink entities claimed that their securities distributions were exempt from registration with the Commission pursuant to the exemptions contained in Regulation D under the Securities Act. However, in clear disregard of the requirements of Regulation D, Lollis solicited and encouraged brokers under his supervision to solicit unaccredited investors nationwide through cold calls and cable television and radio advertisements. ======END OF PAGE 3====== Lollis received $396,806.93 from InterLink, reflecting commissions on sales of common stock effected by him, a monthly salary and a 2% commission on all sales made by brokers. The Commission has reviewed Lollis's sworn financial statement and has determined that he lacks the ability to pay disgorgement of the $396,806.93 in ill-gotten gains that he received from InterLink Data, and interest thereon, or to pay an administrative penalty. C. LEGAL ANALYSIS Sections 5(a) and 5(c) of the Securities Act prohibit the offer or sale of unregistered securities in interstate commerce unless such securities are offered or sold pursuant to an exemption from registration. SEC v. Murphy, 626 F.2d 633, 640 (9th Cir. 1980). Section 10(b) of the Exchange Act and Rule 10b-5 thereunder prohibit materially misleading statements "in connection with the purchase or sale of any security." Section 17(a) of the Securities Act prohibits making such statements in connection with the "offer or sale" of securities. The antifraud provisions are violated when a person acts with scienter, Aaron v. SEC, 446 U.S. 680, 686 n.5 (1980), that is, by showing "a mental state embracing intent to deceive, manipulate or defraud." Ernst & Ernst v. Hochfelder, 425 U.S. 185, 194 n.12 (1976). IV. FINDINGS A. In view of the foregoing, the Commission finds that Lollis 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. B. Lollis has submitted a sworn financial statement dated April 1997, and other evidence and has asserted his financial inability to pay disgorgement plus pre-judgment interest and a civil penalty. The Commission has reviewed the sworn financial statement and other evidence provided by Respondent and has determined that he does not have the financial ability to pay disgorgement of $396,806.93 plus pre-judgment interest and a civil penalty. ======END OF PAGE 4====== V. ORDER Based on the foregoing, the Commission deems it appropriate and in the public interest to accept the Offer submitted by Lollis 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 Lollis 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 Lollis be barred from association with any broker, dealer, investment adviser, investment company or municipal securities dealer; C. Pursuant to Section 21C of the Exchange Act, that Lollis shall pay disgorgement of $396,806.93 plus pre-judgment interest, but that payment of such amount be waived based upon Lollis s demonstrated financial inability to pay; and D. The Division of Enforcement ("Division") may, at any time following the entry of this Order, petition the Commission to: (1) reopen this matter to consider whether Lollis provided accurate and incomplete financial information at the time such representations were made; (2) determine the amount of disgorgement plus pre-judgment interest to order and civil penalty to be imposed; and (3) seek any additional remedies that the Commission would be authorized to impose in this proceeding if Lollis s Offer had not been accepted. No other issues shall be considered in connection with this petition other than whether the financial information provided by Respondent was fraudulent, misleading, inaccurate or incomplete in any material respect, the amount of disgorgement and pre-judgment interest to order and civil penalty to be imposed andwhether any additional remedies should be imposed. Respondent may not, by way of defense to any such petition, contest the findings in this Order or the Commission s authority to impose any additional remedies that were available in the original proceeding. By the Commission. Jonathan G. Katz Secretary ======END OF PAGE 5======