An alternative investment fraud settlement has been reached between Purshe Kaplan Sterling Investments and the Saginaw Chippewa Indian Tribe of Michigan, in which the independent broker-dealer will pay $9.5M. The tribe had filed an arbitration claim contending that it didn’t know that it was paying the firm millions of dollars in commissions on $190M of alternative investments that were purchased through former Purshe Kaplan broker Gopi Krishna Vungarala between 2011 and 2015, including shares in business development companies and non-traded real estate investments trusts (REITs).
Vungarala was not only the Michigan tribe’s broker but also he served as its investment manager, tasked with overseeing its portfolio. He has been accused by the Financial Industry Regulatory Authority (FINRA), too, of to the tribe about the commissions.
The self-regulatory authority (SRO) recently sought to bar the Purshe Kaplan broker from the industry after the alleged fraud occurred—a motion that is on appeal. FINRA also ordered him to disgorge nearly $9.7M plus interest. The SRO said that Vungarala neglected to tell the tribe that it qualified to receive over $3.3M in volume discounts, which would have lowered how much he made in commissions from the sales.
This arbitration settlement between Purshe Kaplan and the Michigan tribe is separate from the one reached between FINRA and the broker-dealer in 2017 in which the firm agreed to pay the tribe $3.4M in restitution plus another $750K for failing to supervise Vungarala.
With 12 years in the industry, Vungarala, previous to working as a registered broker for Purshe Kaplan, was a registered broker with American General Securities Inc.
Another Person Charged in $43M Investor Scam Involving Tribal Bonds
In a different civil fraud case, the US Securities and Exchange Commission has named another defendant Jason Sugarman, who is accused of involvement in a scam to try to “gain undisclosed control” over two investment advisers so that he and others could steal $43M of client monies that were supposed to go toward investing in Native American Tribal bonds. The regulator contends that Sugarman and his associates did get control over bond sale proceed dispositions—proceeds that were supposed to go toward annuities to help the Native American tribal corporation affiliated with the Wakpamni District of the Oglala Sioux Nation and pay back bondholders. Instead, he and the others allegedly misappropriated the funds.
Several others also have been charged civilly in this $60M tribal bond fraud, including Jason Galanis, who persuaded the Oglala Sioux tribal entity to issue the millions of dollars in bonds that were then solicited to investors. He and other individuals then took the money from the sales. Galanis pleaded guilty to parallel criminal charges and was sentenced to 14 years in prison.
Our institutional investor fraud lawyers work with clients in recovering losses resulting from fraud or negligence. Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) also represents high net worth individual investors, retail investors, senior investors, small businesses, families, and retirees. Contact SSEK Law Firm today.
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