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Grand Design of a Wheeler-Dealer : John Galanis Thought Big--Now He's Accused of a Mammoth Scam

July 12, 1987|TOM FURLONG | Times Staff Writer

Late one night in a nearly deserted Chinese restaurant in Greenwich, Conn., so much food was ordered in such a short period that the chef thought a large party of diners had arrived.

As the story goes, when the chef came out of the kitchen to have a look, he found only two huge men, each weighing well in excess of 250 pounds. It was just John Peter Galanis, having another one of his monster meals with his good pal, Jay Botchman.

But then, everything about Galanis--from his appetite to his life style to the white-collar crimes for which he was recently indicted--is of mammoth proportions. If convicted of the current charges against him, which he has denied, Galanis will rank as one of the biggest white-collar crooks in American history.

Already, he is sometimes compared to Robert Vesco, the fugitive financier accused of stealing nearly $400 million from an overseas mutual fund in the early 1970s. Galanis "is just a fantastic scam man," marveled one investigator from the Securities and Exchange Commission.

Prosecutors and former Galanis associates estimate that Galanis-controlled tax-shelter projects in the past five years have caused losses to investors and the government totaling between $500 million and $650 million. Additional criminal cases involving other people are expected to result from the current investigation into Galanis' activities.

Unwitting investors in Galanis-controlled investment schemes include well-known celebrities and sports figures. Among them are actors Dan Akroyd and Eddie Murphy as well as former Los Angeles Rams quarterback Dieter Brock, California Angels pitcher Mike Witt and Los Angeles Raiders defensive lineman Bill Pickel.

Galanis is now in jail on Rikers Island in New York, where he has been indicted on both federal and state charges of securities fraud. Arrested in mid-May at his oceanfront home in the San Diego County community of Del Mar, he is being held on bail totaling $13 million, an amount that judges usually reserve for big-time drug dealers in an effort to keep them from fleeing prosecution. Galanis has pleaded innocent to all charges.

The 44-year-old Galanis has few defenders left. Erstwhile friends either refuse to discuss him publicly or do not acknowledge that they knew him well. Botchman, for example, declined to discuss Galanis even though they were close business associates.

Galanis' life is the tale of a brilliant, but trouble-prone, promoter who has survived through a blend of charm, guile and money that has dazzled--and in some cases blinded--those who have worked for and with him.

In the past 18 years, Galanis has been a stock manipulator, cable television promoter and tax-shelter salesman. Before his arrest in May, he was free on bond on charges of misusing loans from Chase Manhattan Bank that were intended for cable television franchise acquisitions.

Until recently, Galanis was working quietly in cramped offices in Del Mar, just north of San Diego. The office was vacated shortly after his arrest.

Galanis has been indicted six times, served six months in prison, been barred twice by the SEC from selling securities and has narrowly avoided extradition to Canada, where he was wanted on criminal fraud charges.

He spent nearly five years, from 1971 to 1976, as a key government witness in a wide-ranging securities fraud investigation in New York that led to numerous indictments and convictions. At the time, prosecutors praised his actions and suggested that his life of crime was over.

In 1973, Galanis admitted in court that he had misappropriated investment funds he managed and had illegally manipulated and boosted the stock prices of obscure, money-losing companies in 1969 and 1970.

He cornered the available shares of stock and dumped the shares once they reached a certain price, court documents show. Unsuspecting investors lost "many millions" of dollars in this manner after the stock prices fell sharply, the SEC charged.

One investment fund manager accepted payoffs of $600,000 from Galanis and partner Akiyoshi Yamada, a 1972 SEC complaint shows, while another fund manager received $40,000 in cash and a $20,000 sports car. The fund managers received the payments for trading stock in companies in which Galanis and Yamada had an interest.

Operating like a hidden puppeteer, Galanis in recent years has controlled dozens of related companies through a loyal battalion of front men. But his tax-shelter programs in petroleum and real estate during the past five years have faltered badly, leading to criminal charges and widely held bad feelings among investors.

"His deals sounded too good to be true," said one former business associate and Galanis family friend. "And they were."

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