Gerova Financial Group Chairman and Others Plead Guilty

Gerova Financial Group Chairman and Two Others Plead Guilty in Scam to Defraud Native American Tribe and Other Investors

Gary Hirst, Jason Galanis, and Hugh Dunkerley have all pleaded guilty to criminal charges related to a scam to defraud a Native American tribal entity and a number of investment advisory clients. Prosecutors contend that the three men took part in a scam to misappropriate bond proceeds from securities issued by the Wakpamni Lake Community Corporation and to use money in asset management firm clients’ accounts to buy the bonds. The clients were then not able to buy or sell the bonds, because the securities were not liquid and did not have a ready secondary market.

Hirst, who pleaded guilty to four fraud counts, now faces up to 35 years in prison and $2.75M in fines. The former chairman of Gerova Financial Group Ltd was sentenced to 6.5 years in prison last year for defrauding shareholders when he secretly awarded himself and others almost $72M of the reinsurer’s stock. Hirst also had to forfeit approximately $19M.

Prosecutors accused Hirst and co-conspirators of bribing investment advisers to purchase Gerova shares for their own clients. The fraud resulted in almost $20M in illegal profits. Over $2.6M of that went to Hirst. The SEC also brought charges against Hirst, Galanis, his father John Galanis, his two other brothers Jared and Derek Galanis, and investment adviser Gavin Hamels over the Gerova Financial Fraud.

It was last year that Galanis pleaded guilty to conspiracy to commit investment adviser fraud and securities fraud and agreed to forfeit more than $43M. He and his father are accused of convincing  the Oglala Sioux Nation affiliate the Wakpamni Lake Community Corp. to issue $60M in municipal bonds. Galanis, personally, is accused of making about $8.5M from the transaction. Galanis, already sentenced to 173 months for the other fraud, has now pleaded guilty to three new counts of fraud.  He is facing an additional prison sentence of up to thirty years behind bars and up to $5.5M in fines.

Dunkerley is facing up to 50 years in  prison and he could be ordered to pay up to $10.5M. He pleaded guilty to three counts of fraud, as well as one count of falsification of records with the intent to obstruct a government probe.

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Three Plead Guilty to Defrauding Native American Tribe, Investors, InvestmentNews, May 16, 2018

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