Judge Reaffirms Order Freezing Interlink Assets : Court: But he grants release of money for president’s living expenses. The Costa Mesa firm has been accused by the SEC of defrauding investors.

At the request of the Securities and Exchange Commission, a federal judge on Monday reaffirmed his earlier order freezing the assets of a Costa Mesa videophone company and barring the company from raising any more money from investors.

The SEC alleged in a complaint last month that Interlink Data Network of Los Angeles Inc. and its president, Michael Gartner, defrauded about 450 investors of more than $10 million by selling them limited partnerships for a phony videophone company.

On Monday, U.S. District Judge Manuel Real also issued an order precluding Gartner from offering evidence in his own defense in the case as long as he refuses to provide requested evidence to the SEC investigators, citing his Fifth Amendment right against self-incrimination.

Interlink told investors that it planned to build a 21-mile fiber-optic network and link more than 140 buildings in downtown Los Angeles with its patented videophones. But the SEC alleged that the company did not have the technology, never built the network and used a force of unlicensed securities brokers to defraud investors of money by promising vast returns and saying that the company would soon go public.

Rory C. Flynn, an SEC attorney, said the investors included many retirees, disabled people and others who put their life savings into Interlink.

The SEC alleged that Interlink made “flagrant misrepresentations” and operated a Ponzi scheme, using money from later investors to pay off earlier ones. Interlink attorneys and Gartner have denied the charges.

Robert Rosen, an attorney for Interlink, said Monday that the company did not contest the injunction prohibiting it from raising more money. He said the company did not, however, admit to allegations of fraud and noted that it could not raise more money anyway because federal authorities seized all records in a search of Interlink offices on May 18.

Gartner, though, requested money for “reasonable living expenses” of $1,000 a week, money for his sister’s unspecified medical expenses and attorney fees, Rosen said.

Flynn objected to the requests, saying that “good money should not be thrown after bad” and should instead be returned to the investors, some of whom have medical expenses of their own.

“He can get a job if he needs money,” Flynn said of Gartner.

The judge granted the request for living expenses but denied any other release of money. He also said the preclusion order will remain in effect until the lawsuit is settled. All of the company’s 100 or so employees have either resigned or been fired, court papers show.

Rosen said after the ruling: “I think this is a Draconian effort on behalf of the government to use its effort to confiscate all the company’s records, even its computer printers.”

Flynn said the order was necessary because Gartner, while under investigation, removed on two separate occasions a sum of $188,000 from Interlink bank accounts after he learned that the SEC was seeking to freeze company assets. Bank records show that millions of dollars have been removed from Interlink’s accounts since February, the SEC said in a court filing.

Rosen told the SEC that about 35% of the $10 million raised was spent on company operations. That would leave about $7 million unaccounted for, and only $200,000 to $300,000 of the money raised has been tracked down, according to the SEC. Flynn said Gartner refuses to say where the rest of the money is.

According to court documents, Interlink lawyers have said that only 2 or 3 cents on the dollar will be available for return to investors.