SEC Charges Father, Son, Others in Tribal Bonds Scheme

The Securities and Exchange Commission today charged a father and son and five associates with defrauding investors in sham Native American tribal bonds in order to steal millions of dollars in proceeds for their own extravagant expenses and criminal defense costs.

The SEC alleges that Jason Galanis, whose checkered past dates from an accounting fraud case during his days as a major Penthouse shareholder to stock fraud charges last year, conducted the scheme in which the “primary objective is to get us a source of discretionary liquidity,” he wrote in an e-mail to other participants.  Galanis and his father John Galanis convinced a Native American tribal corporation affiliated with the Wakpamni District of the Oglala Sioux Nation to issue limited recourse bonds that the father-and-son duo had already structured.  Galanis then acquired two investment advisory firms and installed officers to arrange the purchase of $43 million in bonds using clients’ funds. 

The SEC further alleges that instead of investing bond proceeds as promised in annuities to benefit the tribal corporation and generate sufficient income to repay bondholders, the money wound up in a bank account in Florida belonging to a company controlled by Jason Galanis and his associates.  Among their alleged misuses of the misappropriated funds were luxury purchases at such retailers as Valentino, Yves Saint Laurent, Barneys, Prada, and Gucci.  Investor money also was diverted to pay attorneys representing Jason and John Galanis in a criminal case brought parallel to the SEC’s stock fraud charges last year.

“We allege that Jason Galanis and his associates embarked upon a brazen and complex scheme in cold and calculated fashion to steal millions of dollars from unwitting investors,” said Andrew M. Calamari, Regional Director of the SEC’s New York office.   “Galanis persisted in this alleged scheme even after he was arrested by criminal authorities and charged by the SEC in a different case.”

In addition to Jason and John Galanis, the SEC’s complaint names Devon Archer of Brooklyn, N.Y., Bevan Cooney of Incline Village, Nev., Hugh Dunkerley of Huntington Beach, Calif. and Paris, France, Gary Hirst of Lake Mary, Fla., and Michelle Morton of Colonia, N.J.  They’re charged with violations of the antifraud provisions of the federal securities laws and related rules.  The SEC seeks disgorgement plus interest and penalties as well as permanent injunctions.  The SEC also seeks officer-and-director bars against Jason Galanis, Archer, Dunkerley, and Morton. 

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against the same seven individuals. 

The SEC’s continuing investigation is being conducted by Tejal D. Shah, Nancy A. Brown, H. Gregory Baker, Christopher Ferrante, and Adam S. Grace.  The litigation will be led by Ms. Brown, Ms. Shah, and Mr. Baker.  The case is being supervised by Sanjay Wadhwa.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, and the U.S. Postal Inspection Service.