SEC Wants Official Held in Contempt : Investigation: Head of video phone firm under investigation allegedly exceeded court-approved living expenses.
The Securities and Exchange Commission filed a motion Tuesday in federal court to hold Michael Gartner, president of an Orange County video phone company, in contempt for exceeding his court-approved living expenses.
The Costa Mesa company, Interlink Data Network of Los Angeles Inc., raised $10 million from 450 investors for what regulators say was a phony video phone venture and is now under investigation for alleged securities fraud.
Postal inspectors and other regulators seized the company’s records at its headquarters in Costa Mesa and in Century City in a search in May. The company effectively shut down its operations afterward, attorneys said.
In June, a federal judge in Los Angeles barred the company from raising more money and froze its assets.
Rory C. Flynn, an SEC attorney who filed Tuesday’s motion for the agency, said that Gartner’s sister, Yvette, recently paid $19,200 in cash for one month’s rent on a 16,000-square-foot mansion in the hills of San Juan Capistrano.
Gartner and his attorney could not be reached for comment.
Earlier, Gartner had told the court he needed money from company accounts to help pay medical expenses for his sister and to cover reasonable living expenses. The U.S. District Court denied Gartner’s requests except for $1,000 in living expenses.
Flynn said he was concerned that Gartner was using money from investors to pay for his personal habits. “If he finds work, he can spend the money,” Flynn said.
Gartner’s home sits on a 4.4-acre lot on Peppertree Bend Road in San Juan Capistrano and has been leased to Gartner by owner Robert L. Wish. It was last appraised in 1982 at $2.9 million.
Kimberly Kintrup, a Clarksville, Tenn., homemaker who invested $5,000 in Interlink, said Tuesday that she has been infuriated by the events of the last several months. She said Gartner sent her a signed letter in June suggesting that the regulatory action against Interlink was inspired by competitors.
“We live on a GI’s salary, and the idea of Gartner getting money for living expenses irks me to no end,” Kintrup said. “He owes the money to investors in full.”
Interlink raised $2.4 million through the sale of stock and $7.5 million from limited partners to build a 21-mile fiber-optic network in downtown Los Angeles and along Wilshire Boulevard. The company said it would market its $3,995 video phones to businesses in about 140 office buildings along the proposed route. Construction of the network has not begun.
