Subject: Re: Criminal case - press release
From: "Eric Schwerin" <[email-masked]>
To: <[email-masked]>
Cc: "Mesires, George R." <[email-masked]>, "MacPhail, Michael R." <[email-masked]>
Date: Wed, 11 May 2016 16:37:01 -0400

Devon is apparently being arraigned this afternoon.

Eric D. Schwerin
[email-masked]

Sent from my iPhone

On May 11, 2016, at 4:36 PM, "[email-masked]" <
[email-masked]> wrote:

Any new news?

RHB
202-333-1880

On May 11, 2016, at 4:15 PM, Mesires, George R. <[email-masked]
<[email-masked]>> wrote:

*From:* MacPhail, Michael R.
*Sent:* Wednesday, May 11, 2016 2:40 PM
*To:* Klinefeldt, Nicholas A.; Mesires, George R.; Levinson, Kenneth S.
*Subject:* Criminal case - press release
*Importance:* High

FOR IMMEDIATE RELEASE

Wednesday, May 11, 2016
Seven Defendants Charged In Manhattan Federal Court With Defrauding A
Native American Tribe And Investors Of Over $60 Million

Preet Bharara, the United States Attorney for the Southern District of New
York, Diego Rodriguez, Assistant Director-in-Charge of the New York Office
of the Federal Bureau of Investigation (“FBI”), and Philip R. Bartlett,
Inspector-in-Charge of the New York Office of the U.S. Postal Inspection
Service (“USPIS”), announced that seven defendants were arrested today and
charged with orchestrating a scheme to defraud investors and a Native
American tribal entity of tens of millions of dollars.

JASON GALANIS and HUGH DUNKERLEY were arrested in the Central District of
California.  JASON GALANIS will be presented later today before a U.S.
Magistrate Judge in Los Angeles and DUNKERLEY will be presented before a
U.S. Magistrate Judge in Santa Ana, California.  GARY HIRST was arrested in
the Middle District of Florida and will be presented later today before a
U.S. Magistrate Judge in Orlando.  JOHN GALANIS, a/k/a “Yanni,” was
arrested in the Southern District of California and will be presented later
today before a U.S. Magistrate Judge in San Diego.  BEVAN COONEY was
arrested in the District of Nevada and will be presented later today before
a U.S. Magistrate Judge in Reno.  DEVON ARCHER was arrested in the Eastern
District of New York.  MICHELLE MORTON was arrested in New Jersey.  ARCHER
and MORTON will be presented later today before United States Magistrate
Judge Ronald L. Ellis in Manhattan.

Manhattan U.S. Attorney Preet Bharara said: “As alleged, the defendants
induced an Oglala Sioux Native American tribal entity to issue bonds
through lies about how the bond proceeds would be invested.  Instead of
investing the proceeds in a way that would provide capital for development
and help cover the interest payments, the defendants allegedly pocketed
most of it to pay for their own personal expenses, homes, cars, travel, and
jewelry.  The defendants’ alleged fraud did not stop with the tribe.  The
defendants also allegedly duped unwitting investors into buying the bonds
by hiding material facts about them, including their lack of liquidity. The
defendants’ alleged fraud has left devastation in its wake: a tribe with
tens of millions in bond obligations it cannot pay, and investors out tens
of millions, left holding bonds they did not want.”

FBI Assistant Director-in-Charge Diego Rodriguez said: “The alleged
fraudsters named in this case didn’t just see an opportunity to steal money
when they thought no one was looking, they allegedly hatched a plan to scam
a municipal entity from the start.  The most egregious fallout from this
scheme is that the bondholders now hold worthless securities, and the tribe
can’t make the interest payments due.”

USPIS Inspector-in-Charge Philip R. Bartlett said: “These individuals
allegedly took advantage of their clients, by luring them into creating
bonds the defendants allegedly knew would never pay any returns to
investors.  White-collar criminals always believe their crimes and
abilities are above the law, but Postal Inspectors and their law
enforcement partners are very skilled at bringing these fraudsters to
justice for their illegal financial schemes.”

According to the Complaint unsealed today in Manhattan federal court:[1]
<file:///\\usa.doj.gov\cloud\NYS\StAndrews\Shared\PressOffice\DRAFTS\Drafts%202016\05-May%202016\2016-05-11%20Galanis,%20Jason,%20et%20al.%20Arrest%20PR\Galanis%20Jason%20et%20al%20%20Arrest%20PR%20final.docx>

From at least in or about March 2014 through in or about April 2016, JASON
GALANIS, GARY HIRST, JOHN GALANIS, a/k/a “Yanni,” HUGH DUNKERLEY, MICHELLE
MORTON, DEVON ARCHER, and BEVAN COONEY engaged in a fraudulent scheme to
cause a Native American tribal entity to issue more than $60 million in
municipal bonds and then misappropriate the proceeds from their sale.
JASON GALANIS and JOHN GALANIS used the millions of dollars in illicit
profits derived from the scheme to pay for a variety of personal and
business expenses, including house payments, car payments and tax
obligations, and to make food, travel and jewelry purchases.  JASON GALANIS
also used the proceeds to make millions of dollars of payments to other
defendants, including to HIRST, DUNKERLEY, and COONEY, as well as to asset
management firms run by MORTON.

To accomplish the scheme, JASON GALANIS and JOHN GALANIS first induced the
Wakpamni Lake Community Corporation (“WLCC”), an Oglala Sioux tribal
entity, to issue tens of millions of dollars in municipal bonds (the
“Tribal Bonds”) based on false and misleading representations.  MORTON and
HIRST, at the direction of JASON GALANIS, used approximately $40 million of
funds belonging to clients of two related investment advisers run by MORTON
– Hughes Capital Management, Inc. (“Hughes”) and Atlantic Asset Management,
LLC (“Atlantic”) – to purchase the Tribal Bonds, even though those
defendants were well aware that material facts about the Tribal Bonds had
been withheld from clients in whose accounts they were placed, including
the fact that the Tribal Bond purchases fell outside the investment
parameters of certain Hughes clients and of the Atlantic investment vehicle
in which the Tribal Bonds were placed.  In addition, those defendants
failed to apprise the Hughes and Atlantic clients of substantial conflicts
of interest relating to the defendants – including that HIRST and DUNKERLEY
were on multiple sides of the deal with respect to the issuance and
placement of the Tribal Bonds.  When Hughes and Atlantic clients learned
about the purchase of the Tribal Bonds, several of them demanded that the
Tribal Bonds be sold.  However, because there was no ready secondary market
for the Tribal Bonds, the Tribal Bonds remain in their accounts.

Moreover, certain defendants, including JASON GALANIS and DUNKERLEY,
falsely represented to the WLCC that proceeds from the sale of the Tribal
Bonds would be placed with an investment manager who would invest the
proceeds in investments that would generate annuity payments sufficient to
pay the interest on the Tribal Bonds and provide additional funds to the
WLCC to be used for tribal economic development purposes.  In fact, none of
the proceeds of the Tribal Bonds were turned over to the investment manager
specified in the closing documents.  Instead, the defendants
misappropriated significant portions of the proceeds for their own personal
use.

Some of the misappropriated proceeds were recycled and provided by JASON
GALANIS to entities affiliated with ARCHER and COONEY in order to
facilitate the purchase of additional Tribal Bonds issued by the WLCC in
subsequent offerings induced by JOHN GALANIS.  As with the first offering
of Tribal Bonds, none of the proceeds of the Tribal Bonds were actually
turned over to the investment manager specified in the closing documents.
Instead, the defendants again misappropriated substantial portions of the
proceeds for their own use.  As a result of the defendants’ fraudulent
scheme, the investors in whose accounts the Tribal Bonds were placed now
hold worthless securities that cannot be sold, and the WLCC has no means of
paying the interest payments due on the Tribal Bonds.

*                *                *

JASON GALANIS, HIRST, JOHN GALANIS, DUNKERLEY, MORTON, ARCHER, and COONEY
are each charged with one count of conspiracy to commit securities fraud,
which carries a maximum sentence of five years in prison and a maximum fine
of $250,000, or twice the gross gain or loss from the offense; and one
count of securities fraud, which carries a maximum sentence of 20 years in
prison and a maximum fine of $5 million, or twice the gross gain or loss
from the offense.  JASON GALANIS, HIRST, and MORTON are also charged with
conspiracy to commit investment adviser fraud, which carries a maximum
sentence of five years in prison and a maximum fine of $250,000, or twice
the gross gain or loss from the offense; and investment adviser fraud,
which carries a maximum sentence of five years in prison and a maximum fine
of $10,000.  The statutory maximum sentences are prescribed by Congress and
are provided here for informational purposes only, as any sentencings of
the defendants would be determined by the judge.

Mr. Bharara praised the investigative work of the FBI and USPIS, and
thanked the SEC, which has filed civil charges in a separate action.

The charges were brought in connection with the President’s Financial Fraud
Enforcement Task Force.  The task force was established to wage an
aggressive, coordinated and proactive effort to investigate and prosecute
financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’
offices, and state and local partners, it is the broadest coalition of law
enforcement, investigatory and regulatory agencies ever assembled to combat
fraud.  Since its formation, the task force has made great strides in
facilitating increased investigation and prosecution of financial crimes;
enhancing coordination and cooperation among federal, state and local
authorities; addressing discrimination in the lending and financial
markets; and conducting outreach to the public, victims, financial
institutions and other organizations.  Since fiscal year 2009, the Justice
Department has filed over 18,000 financial fraud cases against more than
25,000 defendants.  For more information on the task force, please visit
www.StopFraud.gov <http://www.stopfraud.gov/>.

This case is being handled by the Office’s Securities and Commodities Fraud
Task Force.  Assistant U.S. Attorneys Brian Blais, Aimee Hector, and
Rebecca Mermelstein are in charge of the prosecution.

The allegations contained in the Complaint are merely accusations, and the
defendants are presumed innocent unless and until proven guilty.

https://www.justice.gov/usao-sdny/pr/seven-defendants-charged-manhattan-federal-court-defrauding-native-american-tribe-and

*From:* David Nelson [mailto:[email-masked] <[email-masked]>]
*Sent:* Wednesday, May 11, 2016 1:37 PM
*To:* MacPhail, Michael R.
*Subject:* RE: RE:

It’s public.

David Nelson
*BOIES, SCHILLER & FLEXNER LLP*
401 East Las Olas Blvd.  Suite 1200
Fort Lauderdale, FL 33301
(Ph)  954.356.0011
(Direct) 954.377.4233
(Cell) 954.213.881