Ex-Gerova chairman gets 6-1/2 years prison over stock scam

By Jonathan Stempel

NEW YORK (Reuters) - The former chairman of Gerova Financial Group Ltd was sentenced on Thursday to 6-1/2 years in prison for defrauding shareholders by secretly awarding nearly $72 million of the reinsurer's stock to himself and others, U.S. prosecutors said.

Gary Hirst, 64, was also ordered by U.S. District Judge Kevin Castel to forfeit about $19 million and serve one year of supervised release, prosecutors said.

A Manhattan federal jury had convicted Hirst last September on fraud and conspiracy charges, after a two-week trial.

Lawyers for Hirst were not immediately available for comment on the sentencing.

Hirst was one of seven people charged over a scheme at Gerova that prosecutors said ran from 2009 to 2011.

One of the other defendants was Jason Galanis, a former Los Angeles investment banker once dubbed "Porn's New King" by Forbes magazine after he had bought a credit card payment processor for internet pornography.

Prosecutors said the Gerova scheme involved a plan to quietly take control of nearly half of the reinsurer's public float, and cash out profitably after bribing investment advisers to buy shares for their own clients.

The scheme generated nearly $20 million of illegal profit, including $2.62 million for Hirst, prosecutors said.

"Hirst and his co-conspirators issued large amounts of stock, lied about their roles, and found other novel means to defraud the stockholders of Gerova Financial and the investing public," acting U.S. Attorney Joon Kim said in a statement.

Galanis was sentenced in February to 11-1/4 years in prison. His father and two brothers also received prison terms. One defendant remains at large.

Lawyers for Hirst had argued that factors including his recent diagnosis of dementia had justified leniency.

(Reporting by Jonathan Stempel in New York; Editing by Lisa Shumaker)