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GHARAKHANIAN PLEADS GUILTY
By Jennifer English
City News Service
June 14, 2006 Wednesday 7:44 PM PST
A Van Nuys man whose investment scam took in about $20 million,
primarily from Armenian-Americans, was sentenced today to three years
in federal prison.
Melkon Gharakhanian, a 43-year-old Canadian citizen who also used the
name Mike Garian, pleaded guilty in January to one count of mail fraud.
Gharakhanian asked U.S. District Judge George Schiavelli to sentence
him to just under one year behind bars -- 364 days -- to avoid
triggering rules under which he could be deported after serving
his time.
Schiavelli refused, telling Gharakhanian his scam was "absolutely
inexcusable."
"... this was done by concerted fraud, systematic fraud," the
judge told Gharakhanian. "The impact this has had on the victims
is profound."
In pleading guilty, Gharakhanian admitted that between 1999 and 2001,
a Glendale investment firm he and others ran, National Investment
Enterprises Inc., took money from people who believed they were
investing in specific stocks -- including initial public offerings
for Internet businesses and other high-tech companies.
Contracts and other documentation seemed to show that the purported
investments were real, Gharakhanian's plea agreement states. But
investor funds were actually used to buy non-liquid stocks never
listed on account statements, according to the court document.
Investor money was also being used to pay returns to other investors,
a hallmark of what is known as a Ponzi scheme.
Although some of the investors were paid more money than they invested,
Gharakhanian and prosecutors have agreed the amount victims lost in
the scam was between $2.5 million and $10 million.
Assistant U.S. Attorney Michael Wilner said today that the government
believes about $13 million was returned to investors either in the
form of profits, or as refunds after they complained -- leaving about
$7 million investors appear to have lost.
The prosecutor said an obstacle in determining the exact losses of
individual investors -- some of whom invested hundreds of thousands
of dollars -- is that the records of National Investment Enterprises
were destroyed.
That made it difficult to know how much individual investors were
repaid, and exactly how much they invested, Wilner said. And although
authorities believe they know the rough amount the scam took in,
they are unsure if they have located all the investors, he said.
The factors combined meant the government was unable to determine
what amounts Gharakhanian should be ordered to repay to individual
investors, Wilner told the court.
Even if such determinations could have been made, much of the money
investors lost was spent on Gharakhanian's losing stock investments,
Wilner said.
One of the investors, 57-year-old veteran David Howard, told the
judge he has so far been unable to collect on a civil judgement of
about $120,000 from a lawsuit he filed against Gharakhanian. He said
he invested $100,000 with Gharakhanian, an amount that represented
his savings.
After losing the money, Howard said, he had to borrow money to pay
his son's college tuition. He said his financial problems caused a
flare-up of his post-traumatic stress disorder.
"He was instrumental in destroying my family, and he robbed me of
my financial freedom," Howard said of Gharakhanian. "He hasn't given
any of it back yet."
The U.S. Securities and Exchange Commission previously won a $2.6
million judgment against Gharakhanian on behalf of investors, but is
still attempting to locate assets, Wilner said.
For his part, Gharakhanian apologized to the court, and said he lost
his own money, as well.
"I thought I could make money for everybody, but I failed, and I wish
I could pay them back," he told the judge.
Schiavelli ordered Gharakhanian taken into custody immediately to
begin serving his 37-month sentence.
By Jennifer English
City News Service
June 14, 2006 Wednesday 7:44 PM PST
A Van Nuys man whose investment scam took in about $20 million,
primarily from Armenian-Americans, was sentenced today to three years
in federal prison.
Melkon Gharakhanian, a 43-year-old Canadian citizen who also used the
name Mike Garian, pleaded guilty in January to one count of mail fraud.
Gharakhanian asked U.S. District Judge George Schiavelli to sentence
him to just under one year behind bars -- 364 days -- to avoid
triggering rules under which he could be deported after serving
his time.
Schiavelli refused, telling Gharakhanian his scam was "absolutely
inexcusable."
"... this was done by concerted fraud, systematic fraud," the
judge told Gharakhanian. "The impact this has had on the victims
is profound."
In pleading guilty, Gharakhanian admitted that between 1999 and 2001,
a Glendale investment firm he and others ran, National Investment
Enterprises Inc., took money from people who believed they were
investing in specific stocks -- including initial public offerings
for Internet businesses and other high-tech companies.
Contracts and other documentation seemed to show that the purported
investments were real, Gharakhanian's plea agreement states. But
investor funds were actually used to buy non-liquid stocks never
listed on account statements, according to the court document.
Investor money was also being used to pay returns to other investors,
a hallmark of what is known as a Ponzi scheme.
Although some of the investors were paid more money than they invested,
Gharakhanian and prosecutors have agreed the amount victims lost in
the scam was between $2.5 million and $10 million.
Assistant U.S. Attorney Michael Wilner said today that the government
believes about $13 million was returned to investors either in the
form of profits, or as refunds after they complained -- leaving about
$7 million investors appear to have lost.
The prosecutor said an obstacle in determining the exact losses of
individual investors -- some of whom invested hundreds of thousands
of dollars -- is that the records of National Investment Enterprises
were destroyed.
That made it difficult to know how much individual investors were
repaid, and exactly how much they invested, Wilner said. And although
authorities believe they know the rough amount the scam took in,
they are unsure if they have located all the investors, he said.
The factors combined meant the government was unable to determine
what amounts Gharakhanian should be ordered to repay to individual
investors, Wilner told the court.
Even if such determinations could have been made, much of the money
investors lost was spent on Gharakhanian's losing stock investments,
Wilner said.
One of the investors, 57-year-old veteran David Howard, told the
judge he has so far been unable to collect on a civil judgement of
about $120,000 from a lawsuit he filed against Gharakhanian. He said
he invested $100,000 with Gharakhanian, an amount that represented
his savings.
After losing the money, Howard said, he had to borrow money to pay
his son's college tuition. He said his financial problems caused a
flare-up of his post-traumatic stress disorder.
"He was instrumental in destroying my family, and he robbed me of
my financial freedom," Howard said of Gharakhanian. "He hasn't given
any of it back yet."
The U.S. Securities and Exchange Commission previously won a $2.6
million judgment against Gharakhanian on behalf of investors, but is
still attempting to locate assets, Wilner said.
For his part, Gharakhanian apologized to the court, and said he lost
his own money, as well.
"I thought I could make money for everybody, but I failed, and I wish
I could pay them back," he told the judge.
Schiavelli ordered Gharakhanian taken into custody immediately to
begin serving his 37-month sentence.