Father, son in Gerova stock scam get six years prison (updated)
17/02/2017 24:20
(Adds comment from Derek Galanis' lawyer, NEW YORK dateline)
By Jonathan Stempel
NEW YORK, Feb 16 (Reuters) - Two members of a family
conspiracy to manipulate the stock of reinsurer Gerova Financial
Group Ltd GVFG.PK were sentenced to six years in prison on
Thursday, a day after the scheme's main architect received a
more than 11-year term, prosecutors said.
John Galanis, 73, and his son Derek, 44, were also ordered
by U.S. District Judge Kevin Castel in Manhattan to forfeit
$19.04 million and serve three years of supervised release.
Both defendants pleaded guilty last summer to securities
fraud and conspiracy charges.
The sentencings came after Jason Galanis, a former Los
Angeles investment banker once dubbed "Porn's New King," was
sentenced to 135 months in prison by Castel on Wednesday. Jason
is John's son and an older brother of Derek.
David Touger, a lawyer for John Galanis, said: "The court
came to a very just and well thought out sentence."
Anthony Brass, a lawyer for Derek Galanis, said he was
pleased his client received less time than his brother, but
disappointed he got as much as father "because his involvement
was much less. As Judge Castel pointed out, Derek was much more
of an employee in the scheme than a manager."
Prosecutors said the scheme ran from 2009 to 2011, involving
a plan to quietly take control of nearly half of Gerova's public
float, and cash out profitably after bribing investment advisers
to buy shares for their own clients, driving up the stock price.
The scheme was aided by Gerova's then-chairman Gary Hirst,
and led to nearly $20 million of illegal profits, prosecutors
said. Charges were announced in September 2015.
"John and Derek Galanis conspired to have more than $70
million worth of stock issued, hiding Jason Galanis' control of
those shares, so that they could cash out at the expense of
unwitting victim investors," U.S. Attorney Preet Bharara said in
a statement.
Hirst was convicted on fraud and conspiracy charges, and
faces a March 17 sentencing. Jared Galanis, a brother of Jason
and Derek, was sentenced last month to 150 days in prison for
his role. Another defendant, Ymer Shahini, is at large.
Jason Galanis was nicknamed "Porn's New King" by Forbes
magazine in 2004 after he bought the largest U.S. processor of
credit card payments for internet pornography.
In a separate criminal case, he has pleaded guilty, but not
yet been sentenced, over what prosecutors called a roughly $60
million scam to steal proceeds of a bond issue by an affiliate
of South Dakota's Oglala Sioux Nation.
The Gerova case is U.S. v. Galanis et al, U.S. District
Court, Southern District of New York, No. 15-cr-00643.
(Reporting by Jonathan Stempel in New York; Editing by Tom
Brown)
((jon.stempel@thomsonreuters.com; +1 646 223 6317; Reuters
Messaging: jon.stempel.thomsonreuters.com@reuters.net))
Keywords: GEROVA FINANCIAL FRAUD/