Galanis Guilty in Major Tax Shelter Fraud Schemes : Promoter Convicted of Bilking Investors Across the Nation

Tax shelter promoter John Peter Galanis was convicted Tuesday of masterminding a series of multimillion-dollar fraud and racketeering schemes that stretched from Connecticut to California.

Galanis, who enjoyed extravagant parties and $400 bottles of wine, was convicted after a three-month trial of bilking thousands of investors across the nation. The jury deliberated for nine days before finding Galanis, 44, guilty of 44 counts, including racketeering, tax fraud, securities fraud, bank fraud, bribery and criminal contempt.

He has been compared to fugitive financier Robert A. Vesco, who stands accused of stealing $400 million from an overseas mutual fund. Charming and sophisticated, Galanis was portrayed in court documents as a cunning international swindler with few equals.

His business dealings include a portfolio of real estate and oil investor partnerships gone sour. Informed estimates say Galanis-related partnerships have lost between $500 million and $650 million since 1982.

For years, Galanis operated out of Greenwich, Conn., where he lived on a $2.5-million estate that had a lake, tennis court and pool. He moved to California several years ago, buying expensive homes in Rancho Santa Fe and Del Mar in San Diego County. He was confined to the New York area since last September by court order.

Galanis was convicted of creating a phony tax shelter that netted him millions of dollars, bribing officials of Peoples National Bank in New York’s Rockland County, fraudulently taking over the Heritage Bank in Salt Lake City and seizing control of Columbia Federal Savings Bank in Westport, Conn., through fraudulent misrepresentation to federal regulators.

In addition, he was convicted of illegally taking over ISI Mutual Funds in Oakland and stealing $4 million from ISI by selling it securities at inflated prices.

At Galanis’ direction, ISI invested in various companies with strong ties to Galanis, including Connecticut’s Columbia Federal Savings, according to an indictment summary. ISI has written off those investments as a complete loss.

Bribery Conviction

Galanis also was convicted of creating a syndication known as Transpac Drilling Venture that promised investors grossly inflated tax losses that could be used to reduce their income tax liabilities.

The 2,500 investors in the oil drilling business received more than $172 million in fraudulent partnership losses between 1982 and 1984.

One co-defendant, Anthony Marchese, 47, of Southport, Conn., was convicted of racketeering and bribery involving the now-defunct Peoples National Bank and Heritage Bank.

Two other co-defendants, Samuel Rosengarten, 66, of Armonk, N.Y., and Arthur Mason, 46, of Chevy Chase, Md., were acquitted of a variety of counts against them.

Assistant U.S. Atty. Vincent Briccetti had told the jury that Galanis, who had pleaded guilty to securities fraud 15 years ago, ran what he called the “Galanis Organization” interested in raising capital for its members.

Eleven other people pleaded guilty for their roles in Galanis’ various schemes and nine testified against him, Briccetti said.

When Galanis heard the verdict, “He was totally stone-faced,” Briccetti said. “There was no reaction whatsoever.”

Galanis faces up to 207 years in prison and fines up to $8 million when U.S. District Judge Charles Brieant sentences him Sept. 20.

Marchese faces up to 55 years in prison and $530,000 in fines when he is sentenced the same day.