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SEC v. NETELKOS

April 22, 1986

SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
v.
CHRISTOS NETELKOS, a/k/a CHRISTOPHER J. NICKOS, ARNO ARNDT a/k/a ERNST ARNDT, CHARLES HAIG GAMAREKIAN a/k/a CHARLES HAIG, FALCON SCIENCES, INC., PAUL F. DONNELLY, TRUST AND INVESTMENT, A.G., ROBERT I. GOODMAN, Defendants


Shirley Wohl Kram, U.S.D.J.


The opinion of the court was delivered by: KRAM

MEMORANDUM OPINION AND ORDER

SHIRLEY WOHL KRAM, U.S.D.J.

 Currently before the Court are several motions filed by the Securities and Exchange Commission ("SEC"). The disposition of these motions is discussed below.

 Motion to Consolidate

 This Court has previously issued preliminary injunctions against Christos Netelkos and Trust and Investment, A.G. ("T&I"), two of the defendants in the above-captioned matter. See SEC v. Netelkos, 592 F. Supp. 906 (S.D.N.Y. 1984); SEC v. Netelkos, No. 84 Civ. 335 (SWK) (S.D.N.Y. January 23, 1985). The SEC now moves, pursuant to Fed. R. Civ. P. 65 (a)(2), to have these preliminary injunctions consolidated into permanent injunctions. *fn1" The SEC also seeks an order of disgorgement against Netelkos and T&I.

 At a hearing held in the above-captioned matter during March, 1986, Netelkos consented to the entry of a permanent injunction against him. *fn2" T&I has not appeared in this action, and has presented no opposition to the SEC's motion although it was properly served by the SEC with the complaint and the SEC's moving papers.

 The Court has previously conducted a comprehensive and exhaustive hearing on the SEC's motion for a preliminary injunction. More recently, in March, 1986, the Court held a hearing which spanned four days on the SEC's motion to consolidate and on its other outstanding motions. The Court has also previously issued three separate opinions on the SEC's motion for a preliminary injunction against all of the defendants. See SEC v. Netelkos, 592 F. Supp. 906 (S.D.N.Y. 1984); SEC v. Netelkos, No. 84 Civ. 335 (SWK) (S.D.N.Y. September 12, 1984); SEC v. Netelkos, No. 84 Civ. 335 (SWK) (S.D.N.Y. January 23, 1985). The Court also issued a supplemental order to its August 3, 1984 opinion on September 21, 1984. All of these opinions and orders contained lengthy and detailed findings of fact and conclusions of law. These four opinions and orders are hereby fully incorporated in the instant opinion.

 In addition to incorporating the Court's previous four opinions and orders, the Court notes that all of the evidence and testimony received at the preliminary injunction hearing would have been admissable at a trial on the merits. Accordingly, the Court does consider that evidence in deciding whether a permanent injunction should issue. Fed. R. Civ. P. 65(a)(2). Moreover, pursuant to Fed. R. Civ. P. 53 (e)(2), the Court hereby fully adopts and incorporates in the instant opinion the Final Report of the Special Master. The Court has previously considered the parties' objections and comments with regard to the Special Masters' Preliminary and Final Reports. Having considered these, the Court has decided to fully adopt the Special Master's Final Report.

 Based on the foregoing, including specifically the hearing for a preliminary injunction, the four preliminary injunction opinions and orders incorporated in the instant opinion, the Special Master's Final Report, also incorporated in the instant opinion, the evidence received at the March, 1986 hearing, and the consent of Netelkos and absence of opposition by T&I, the Court grants the SEC's motion to consolidate the preliminary injunctions against Netelkos and T&I into permanent injunctions.

 Accordingly, it is hereby:

 
ORDERED that Defendant Netelkos, his agents, servants, employees, nominees, assigns, corporations and other entities under his control, and those persons in active concert or participation with him, and each of them, be and hereby are permanently enjoined from, directly or indirectly, violating the provisions of Title 15, United States Code, Sections 77 and 78, et seq., including, but not limited to, the following:
 
A. In the absence of any applicable statutory exemption:
 
(1) making use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell Falcon securities, or any other securities, through the use or medium of any prospectus or otherwise, unless and until a registration statement is in effect with plaintiff SEC as to such securities;
 
(2) carrying or causing to be carried through the mails or in interstate commerce, for the purpose of sale or for delivery after sale, Falcon securities, or any other securities, unless and until a registration statement is in effect with plaintiff SEC as to such securities; or
 
(3) making use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy Falcon securities, or any other securities, through the use or medium of any prospectus or otherwise, unless a registration statement has been filed with plaintiff SEC as to such securities, or while the registration statement is the subject of a refusal order or stop order or (prior to the effective date of the registration statement) any public proceeding or examination under Section 8 of the Securities Act, 15 U.S.C. Section 77h; in violation of Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. Sections 77e(a) and 77e(c);
 
B. In connection with the purchase or sale of Falcon securities or any other securities, by the use of the means or instrumentalities of interstate commerce, or of the mails, or of any facility of a national securities exchange:
 
(1) employing any device, scheme or artifice to defraud;
 
(2) making any untrue statement of material fact or omitting to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or
 
(3) engaging in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person; in violation of Section 10(b) of the Exchange Act, 15 U.S.C. Section 78j(b) and Rule ...

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