U.S. Securities and Exchange Commission
Litigation Release No. 18186 / June 10, 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.)
United States District Court Rules On Securities and Exchange CommissionN's Application To Hold Relief Defendant Aegis Financial In Contempt For Violating Court Order To Repay Investor Funds
The Commission announced today that on May 21, 2003, the Honorable George H. King, United States District Judge for the Central District of California, ordered relief defendant Aegis Financial, LLC ("Aegis") to produce documentation demonstrating a financial inability to comply with a Court order that Aegis deposit $210,000 of funds belonging to defendant National Investment Enterprise's ("NIE") investors into the registry of the Court. The Court further ordered the parties to meet and confer within thirty days in an attempt to resolve the matter. The Court issued this order in connection with an application filed by the Commission asking the Court to hold Aegis in contempt for violating the order to deposit the $210,000.
The Commission had previously reached a settlement with Aegis, a Chicago-based commodities introducing 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 to it by defendant Michael Garian ("Garian") and NIE.
On February 11, 2003, the Court ordered Aegis to deposit $210,000 into the Court's registry no later than February 28, 2003. On April 8, 2003, the Commission applied for a contempt order, alleging that Aegis violated the Court's order by depositing a $210,000 check that was subsequently returned by the bank marked "Payment Stopped." Aegis filed a response asserting that it was unable to comply with the Court's order because it lacked sufficient funds to do so.
The Commission's complaint, filed on February 7, 2003 against NIE and Garian, 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.
The SEC's complaint alleges that Garian's and NIE's conduct violated federal antifraud, investment adviser fraud, and securities and investment company registration provisions of the federal securities laws. The SEC's complaint asks the Court to: (1) enjoin Garian and NIE from committing further securities law violations; (2) order Garian and NIE to return, with interest, all ill-gotten gains; and (3) order Garian to pay a civil money penalty. The litigation in that matter (Litigation Release No. 17974) is ongoing.