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United States of America v. Bevan Cooney
Case Number: 1:16-cr-00371-RA
Judge: Ronnie Abrams
Court: United States District Court for the Southern District of New York (New York County)
Plaintiff's Attorney: Rebecca Mermelstein, Brendan F. Quigley, and Negar Tekeei
Defendant's Attorney: Paula Jaclyn Notari, Abraham Jabir Abegaz-Hassen, Diane H. Bang
New York, NY - Bevan Cooney Sentenced To 30 Months In Prison For The Fraudulent Issuance And Sale Of More Than $60 Million Of Tribal Bonds
Audrey Strauss, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. § 515, announced that BEVAN COONEY was sentenced today by the U.S. District Judge Ronnie Abrams to 30 months in prison for defrauding a Native American tribal entity and various investment advisory clients of tens of millions of dollars in connection with the issuance of bonds by the tribal entity and the subsequent sale of those bonds through fraudulent and deceptive means.
Ms. Strauss said: “Bevan Cooney was part of a conspiracy that orchestrated a complex and corrupt scheme to defraud a Native American community and the clients of two asset management firms. Today he learned the cost of committing those crimes. This Office is committed to protecting the investing public by appropriately prosecuting market predators.”
According to the allegations in the charging documents and statements made in court proceedings:
From March 2014 through April 2016, COONEY, John Galanis, Jason Galanis, Gary Hirst, Michelle Morton, Hugh Dunkerley, and others engaged in a fraudulent scheme that involved (a) causing the Wakpamni Lake Community Corporation (“WLCC”), a Native American tribal entity, to issue a series of bonds (the “Tribal Bonds”) through lies and misrepresentations; (b) deceptively causing clients of asset management firms controlled by Hirst, Morton, and others to purchase the Tribal Bonds, which the clients were then unable to redeem or sell because the bonds were illiquid and lacked a ready secondary market; and (c) misappropriating the proceeds resulting from those bond sales.
The WLCC was convinced to issue the Tribal Bonds through false and fraudulent representations by John Galanis. Simultaneously, Jason Galanis, with the backing of COONEY and others, worked to acquire Hughes Capital Management (“Hughes”), a registered investment adviser. Morton and Hirst were installed as Hughes’s chief executive officer and chief investment officer, respectively. Within weeks of taking control of Hughes, Morton and Hirst placed the entire $28 million first series of Tribal Bonds with Hughes clients but failed to disclose material facts about the Tribal Bonds, including the fact that the Tribal Bonds fell outside the investment parameters set forth in the investment advisory contracts of certain Hughes clients. In addition, Hughes’s clients were not told about substantial conflicts of interest with respect to the issuance and placement of the Tribal Bonds before the Tribal Bonds were purchased on these clients’ behalf.
The defendants and their co-conspirators then misappropriated the proceeds of first Tribal Bond issuance. Specifically, although the Tribal Bonds were supposed to be invested in an annuity, Dunkerley, at the direction of Jason Galanis, transferred significant amounts of the bond proceeds to support the defendants’ business and personal interests. John Galanis, for example, secretly received $2.35 million in proceeds of the first bond issuance, which he spent on a variety of personal expenses and luxury items, including cars, jewelry, and hotel expenses. Similarly, Jason Galanis used a portion of the proceeds of the first Tribal Bond issuance to finance the purchase of a $10 million luxury apartment in Tribeca.
In addition, after John Galanis induced the WLCC to issue a second round of Tribal Bonds, COONEY and others used $20 million of bond proceeds from the first issuance to buy the entirety of the second issuance. As a result of the use of recycled proceeds to purchase additional issuances of Tribal Bonds, the face amount of Tribal Bonds outstanding increased and the amount of interest payable by the WLCC increased, but the actual bond proceeds available for investment on behalf of the WLCC did not increase. The bonds purchased by COONEY and others were then used to meet net capital requirements at two broker dealers in which COONEY and others had interests. COONEY also obtained a $1.2 million loan based on his purported ownership of the bonds, which he subsequently failed to repay. In addition, millions of dollars in bond proceeds from the first and second issuances were used finance the acquisition of companies that the defendants and their co-conspirators acquired as part of a strategy to build a financial services conglomerate.
In the spring of 2015, John Galanis induced the WLCC to issue an additional $16 million worth of Tribal Bonds. Simultaneously, Jason Galanis and others purchased a second investment adviser, Atlantic Asset Management (“Atlantic”), and installed Morton as the chief executive officer. Within days of obtaining control of Atlantic, Morton placed the entirety of the $16 million Tribal Bond issuance with an Atlantic client, without the client’s consent and without disclosing the fact that the Tribal Bonds were outside the client’s investment parameters and that numerous conflicts of interest existed. The proceeds of the $16 million issuance were again not invested in an annuity as promised, but instead were diverted to, among other things, finance the defendants’ acquisition of another company in furtherance of their plan to build a financial services conglomerate, to pay $75,000 to COONEY, and make payments to one of the broker dealers in which COONEY and others had interests.
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In addition to the prison term, COONEY, 46, was sentenced to three years of supervised release. COONEY was also ordered to forfeit $9,527,000 and to make restitution in the amount of $43,785,176.
Jason Galanis, who pled guilty to conspiracy to commit securities fraud, securities fraud, and investment adviser fraud, was sentenced to a term of 173 months in prison on August 11, 2017. Gary Hirst, who pled guilty to securities fraud, conspiracy to commit securities fraud, investment adviser fraud, and conspiracy to commit investment adviser fraud, was sentenced to 84 months in prison on September 7, 2018. John Galanis, who was convicted after trial of securities fraud and conspiracy to commit securities fraud, was sentenced to 120 months in prison on March 8, 2019. Michelle Morton, who pled guilty to conspiracy to commit securities fraud and investment adviser fraud, is awaiting sentencing. Hugh Dunkerley, who pled guilty to conspiracy to commit securities fraud, two counts of securities fraud, bankruptcy fraud, and falsification of records with the intent to obstruct a government investigation, is also awaiting sentencing.
Ms. Strauss praised the work of the U.S. Postal Inspection Service and the Federal Bureau of Investigation, and thanked the Securities and Exchange Commission.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force.
18:371.F CONSPIRACY TO DEFRAUD THE UNITED STATES
15:78J.F MANIPULATIVE AND DECEPTIVE DEVICES
Outcome: 07/31/2019 Minute Entry for proceedings held before Judge Ronnie Abrams: Sentencing held on 7/31/2019 for Bevan Cooney (7) Count 1ss,2ss. AUSA Brendan Quigley present. AUSA Rebecca Mermelstein present. FBI Special Agent Nick Kroll present. Defendant (7) Bevan Cooney present with attorneys Paula Notari and Abraham Jabir Abegaz-Hassen. Court reporter Pam Utter present. See Judgment for terms of sentence. (jbo) (Entered: 07/31/2019)
07/31/2019 788 ORDER OF RESTITUTION as to Bevan Cooney. (Signed by Judge Ronnie Abrams on 7/31/2019) (See ORDER set forth) (ap) (Entered: 07/31/2019)
07/31/2019 DISMISSAL OF COUNTS on Government Motion as to Bevan Cooney (7) Count 1s,1,2s,2. (jbo) (Entered: 08/01/2019)
07/31/2019 789 JUDGMENT IN A CRIMINAL CASE as to Bevan Cooney (7). Defendant was found guilty on Count(s) 1ss, 2ss. Any open counts are Dismissed; Imprisonment: 30 months on count 1 and count 2 to run concurrently; Supervised Release: 3 years on both counts to be served concurrently. The court makes the following recommendations to the Bureau of Prisons: It is recommended that the defendant be designated to FCI Sheridan Oregon (minimum security). It is also recommended that the defendant participate in the RDAP program while incarcerated. Assessment: $200 due immediately; Restitution: $43,785,176.00. (Signed by Judge Ronnie Abrams on 7/31/19)(jbo) (Entered: 08/01/2019)