Ex-San Diegan’s Friends Stunned : Pawn or Playmaker in Fraud Case?

Those who knew him as a Point Loma High School honors student say John F. Landon had all the tools for success: brains, good looks, a prominent San Diego family, athletic ability and easygoing charm.

His classmates voted him the Class of 1966 graduate “Most Likely to Succeed.”

A degree from Stanford University and a stint in the Peace Corps in Nepal after graduation reinforced classmates’ image of Landon.

“In a group, he was self-assured and fun to be around,” one said. “He had a dry sense of humor, like a lot of intellectuals.”

Head football coach Bennie Edens described Landon, a two-year letterman, as “an exceptionally bright young man. I can’t say anything but positive things about him.”

Case Called Enormous

Today, Landon stands accused of being a major figure in one of the largest suspected investment and tax frauds of the decade. According to criminal and civil suits filed in New York courts last month, Landon was a close associate of alleged swindler John Peter Galanis, who is charged with bilking tax shelter investors out of tens of millions of dollars.

The government says the reportedly bogus tax shelters organized by Galanis, Landon and others deprived the U.S. Treasury of $172 million in taxes.

As president of Salt Lake City-based Transpac Drilling Ventures, an investment firm that the government maintains was actually controlled by Galanis, the 39-year-old Landon allegedly put together about 80 fraudulent limited partnerships to finance oil and gas drilling operations, court documents say.

Government investigators and civil plaintiffs allege that the partnerships were shams that defrauded 2,500 investors of at least $40 million, most of which was diverted to the personal use of Galanis and his associates.

Landon also stands accused by federal authorities of participating in the fraudulent takeover of Heritage Bank & Trust of Salt Lake City, a takeover they say was designed to ease the laundering of funds into accounts controlled by Galanis.

Landon was also the sole proprietor of the insolvent Chilton Private Bank in Chilton, Tex., which was taken over by the state banking commission last month after newspaper accounts of the former San Diegan’s arrest generated a run by worried depositors.

Federal prosecutors say they are investigating the Chilton bank and its relationship with the Galanis organization. Galanis’ wife, Chandra, was overdrawn by $1.5 million on her account at Chilton Private Bank, according to a spokesman for a New Jersey-based investor group considering a suit against Galanis.

According to the federal affidavit filed in support of Landon’s arrest warrant, confidential sources told federal investigators that Galanis “installed (Landon) as owner and president of Transpac Oil; that Landon has no authority to operate Transpac Oil independent of Galanis’ control; that Landon and Transpac Oil’s business expenses were ultimately paid by one or another of the Galanis Organization’s controlled entities operating in Greenwich, Conn., and that Transpac Oil effectively functioned as the Galanis Organization’s Salt Lake City division.”

In a 1982 prospectus, however, Transpac Oil’s investors were led to believe that the companies were “located in Salt Lake City and were solely owned by John F. Landon,” and not by Galanis, according to the federal complaint.

Landon surrendered to federal authorities in New York on May 13 and was arraigned on racketeering, tax and investment-fraud charges. He is now free on $400,000 bail.

Galanis, who was arrested at his sprawling seaside mansion in Del Mar on May 12, is being held in lieu of $10 million bail in a New York jail.

Though Landon has lived in Park City, Utah, for the last decade, he has maintained strong San Diego ties through his membership at the San Diego Yacht Club, where his $400,000 70-foot racing yacht called the Kathmandu is docked.

Ever since his days as a junior yachtsman at the San Diego Yacht Club, Landon’s prime passion has been sailing, and some acquaintences viewed his purchase of the Kathmandu as the fulfillment of a lifelong dream to become a world-class racer. An “ultralight” yacht capable of sailing at speeds up to 23 knots, twice the top speed of most boats that length, the Kathmandu gave Landon’s dream instant credibility, friends say.

Kathmandu won the five-race California Cup in 1985 as well as its class in the Newport Beach-Ensenada race earlier this year.

Landon apparently also has remained close to his parents, both prominent San Diegans. His father, Morris (Brick) Landon was a World War II submarine commander and was commodore of the San Diego Yacht Club in 1973. The elder Landon is now senior vice president at M.H. Golden Co., the city’s largest general contractor.

At a bail hearing in New York last week, Landon’s parents put up their Point Loma residence and one other San Diego County property as security for Landon’s bail, a federal prosecutor said.

The allegations against Landon produced shock among several of his Point Loma High classmates and yacht club acquaintences. Several Point Loma graduates described Landon, a National Merit Scholarship semifinalist, as one of their class’ best and brightest. “He was an egghead who got along with everybody,” one said.

Another, who last saw Landon in 1986 at a 20-year reunion in San Diego last summer, said, “John was one of the last people in the world I’d have figured to go wrong.”

Landon did not return telephone calls to his Park City residence, nor were his parents available for comment. Landon’s New York-based attorney, John J. Tigue, said only that his client plans to plead innocent to all charges and that he will mount a “vigorous defense.”

After leaving the Peace Corps in the mid-1970s, friends say, Landon moved to Utah, where he dabbled in real estate and, along with a group that included other Stanford graduates, opened two bars called the Dead Goat Saloon and the Haggis Social Club in Salt Lake City. Friends theorize that Landon met Galanis, who at the time was working for a Salt Lake City cable TV company, at one of the bars.

Galanis had been convicted of investment fraud in 1973, spent six months in prison, and was twice enjoined by the Securities and Exchange Commission because of fraudulent investment activities. The Canadian government unsuccessfully has sought to extradite Galanis to face investment fraud charges there.

Landon was crewing on Galanis’ boat, the Jader, in 1979, the year it won the Transpacific yacht race from California to Hawaii. In fact, Transpac Drilling Ventures, formed in 1979, was named for the race.

Landon’s initial dealings with Galanis coincided with the beginning of a “meteoric rise” in Landon’s career, according to one acquaintance.

“Landon got involved with Galanis, and he was enticed by the tremendous amount of money that was available. It’s called greed, and we’re all subject to it at one time or another,” one attorney involved in the Galanis case said.

Another of Landon’s one-time friends said he held out hope that Landon was an unwitting tool for Galanis and that that prosecutors were coming down hard on Landon in hopes of gaining his testimony against Galanis in court.

In disagreement was Herbert Beigle, a Chicago attorney representing 100 Transpac investors who have sued Galanis, Landon and others in U.S. District Court in New York’s Southern District.

“Anyone as intimately involved in Transpac (as Landon was) would have had to have known of the lack of economic substance in the structure of the programs,” Beigle said. “That makes it highly unlikely that anyone at Landon’s level would have somehow been an unwitting participant.”