O.C. Man Who Sold Bogus Securities Must Pay $8 Million

Michael Gartner, who once lived the high life in a rented mansion in the hills of San Juan Capistrano, was sentenced Tuesday to 51 months in prison for duping investors into paying $12 million for bogus securities in his video telephone company.

Gartner also was ordered by U.S. District Judge Consuelo B. Marshall in Los Angeles to pay $8 million in restitution to some 600 defrauded investors of his Interlink Data Network in Costa Mesa.

“This was an extremely sophisticated fraud, involving videos and infomercials,” said Assistant U.S. Atty. Randall R. Lee.

It also involved his efforts while in jail for the last three years to peddle securities in a videophone company that would operate over fiber-optic cable, Lee said. He even had a Web site on the Internet with a picture of him and his videophone from the original marketing materials, the prosecutor said.

Gartner’s court-appointed lawyer, Paul E. Potter of Pasadena, said the 35-year-old businessman had a great idea for a videophone network but simply was “way ahead of himself.”

Potter said: “He represented things that were in a planning stage as a fait accompli. And he represented that options he had were contracts.”

With time off for good behavior, Gartner could be released from prison within a year. He has been held in custody since January 1994, first on a civil contempt-of-court arrest and then on a criminal detainer. Much of that time counts toward his sentence.

Gartner pleaded guilty in December to securities fraud and four other felonies in operating IDN as a Ponzi scheme, using money from later investors to pay interest to earlier ones while funneling at least $2.5 million to himself.

He was indicted in August 1994 on 30 counts of criminal fraud and money laundering. His sister, Yvette Gartner, and a former IDN executive, Anthony Lollis, also were indicted with him. Lollis pleaded guilty to two securities fraud counts and will be sentenced June 30. Yvette Gartner is a fugitive.

Also, chief IDN engineer Delbert Wolverton, who was to develop the videophone that Gartner touted as having the clarity of a motion picture, pleaded guilty to charges of hiding his knowledge of the fraud. His sentencing is set for Aug. 4.