By Jonathan Stempel
NEW YORK (Reuters) – A 73-year-old Californian charged with running a scheme with three of his sons to manipulate the stock price of reinsurer Gerova Financial Group Ltd and then dump the shares at inflated prices pleaded guilty to fraud on Wednesday, U.S. prosecutors said.
John Galanis, of Oceanside, California, admitted to securities fraud and conspiracy charges before U.S. Magistrate Judge Sarah Netburn in Manhattan.
The defendants were accused of secretly taking control of nearly half of Gerova’s shares and then cashing out at a profit after bribing investment advisers to buy the shares for their own clients, costing investors in Gerova nearly $20 million. Prosecutors said the scheme ran from 2009 to 2011.
Under his plea agreement, Galanis could be sentenced to roughly eight to 10 years in prison and fined as much as $5 million. He also agreed to forfeit $19.04 million.
David Touger, a lawyer for Galanis, did not immediately respond to requests for comment.
Galanis’ sons Jason, Jared and Derek and former Gerova Chairman Gary Hirst were also criminally charge. They face a Sept. 12 trial. A sixth defendant pleaded guilty, and a seventh is at large.
Jason Galanis, an investment banker, faces unrelated criminal charges that he enlisted his father and others to steal proceeds of bond issues from an affiliate of South Dakota’s Oglala Sioux Nation, and used them to make other investments and buy luxury goods.
John Galanis was also charged in that case, which was announced on May 11.
Jason Galanis’ bail in the Gerova case was revoked following his arrest in the tribal bond case.
A federal appeals court on Wednesday denied Jason Galanis’ request to be freed from custody, saying, “The evidence supports the district court’s probable cause finding of Galanis’s continued criminal activity while on release.”
The cases are U.S. v. John Galanis et al, U.S. District Court, Southern District of New York, No. 15-cr-00643; and U.S. v. Jason Galanis et al, 2nd U.S. Circuit Court of Appeals, No. 16-1761.
(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)