Ex-Gerova Financial president convicted of securities fraud (updated)
28/09/2016 23:24
(Adds details on bail decision, comment from defense lawyer)
By Nate Raymond
NEW YORK, Sept 28 (Reuters) - The former president of
reinsurer Gerova Financial Group Ltd GVFG.PK was convicted on
Wednesday on charges that he participated a scheme orchestrated
by a man once dubbed "Porn's New King" to defraud investors.
Gary Hirst, 64, was found guilty by a federal jury in
Manhattan on all four counts he faced, including conspiracy,
securities fraud and wire fraud charges, according to court
records.
After the verdict, U.S. District Judge Kevin Castel
increased Hirst's bond from $1 million to $3 million and ordered
the Florida resident be placed in custody until he could meet
the new bail conditions. Hirst's sentencing was set for Feb. 3.
"We are disappointed with the verdict and intend to pursue
an appeal," said Michael Tremonte, Hirst's lawyer.
The trial followed charges announced last year against seven
people including Hirst and Jason Galanis, an investment banker
who prosecutors said oversaw a scheme to secretly dump millions
of Gerova shares in an unregistered offering and distribution.
Galanis, a Los Angeles resident whose father and two
brothers were also charged, was dubbed "Porn's New King" by
Forbes magazine in 2004 after he bought the nation's largest
processor of credit card payments for online pornography.
Authorities said Galanis was deeply involved in Gerova's
management, but investors were not told that due to a 2007 U.S.
Securities and Commission settlement barring him from serving as
an officer or director at a publicly-traded company.
Prosecutors said in 2010, Hirst, Gerova's president and
board chairman, worked with Galanis to use a straw man and fake
documents to issue $72 million worth of Gerova stock that they
would secretly control without board approval.
Galanis, working with his family members, then helped the
straw man deposit the shares into U.S. brokerage accounts,
prosecutors said. Subsequent stock sales netted them about $20
million, $2.6 million of which Hirst received, prosecutors said.
Galanis meanwhile bribed two investment advisers to buy
Gerova shares to lessen the stock sales' price-depressing
impact, prosecutors said.
The New York Stock Exchange halted trading in Gerova's stock
in 2011, following reports raising questions about the company.
Gerova commenced liquidation proceedings in Bermuda in 2012.
Five people have pleaded guilty, including Galanis in July.
He has yet to be sentenced. urn:newsml:reuters.com:*:nL1N1A717C
A separate case against Galanis, Hirst and five others filed
in May over what authorities call a scheme to cheat investors
and a Native American tribe out of millions of dollars remains
pending. urn:newsml:reuters.com:*:nL2N188156
The case is U.S. v. Galanis et al, U.S. District Court,
Southern District of New York, No. 15-cr-00643.
(Reporting by Nate Raymond in New York; Editing by Tom Brown)
((Nate.Raymond@thomsonreuters.com and Twitter @nateraymond;
646-223-6752; Reuters Messaging:
nate.raymond.thomsonreuters.com@reuters.net))
Keywords: GEROVA FINANCIAL FRAUD/