A Parkland businessman who is under federal investigation for his role in an alleged $27 million investment fraud was sentenced Monday to six months in prison for unrelated probation violations.
Louis N. Gallo III underreported his personal finances and associated with a known felon while he was finishing up three years’ probation for federal charges out of New Jersey, U.S. District Judge William Zloch found.
Federal prosecutors argued Gallo, 42, used his real estate and investment business, American Financial Solutions, as his personal piggybank, hiding his true income from his probation officer. American Financial Solutions funds went to cover everything from his children’s school tuition to nearly $24,000 in charges at a Pompano Beach strip club in just three months, court records show.
While running American Financial Solutions, Gallo also was vice president of Commodities Online, a Fort Lauderdale firm that the U.S. Securities and Exchange Commission has alleged was a multimillion dollar fraud. In addition to a SEC lawsuit, Commodities Online is the focus of a FBI investigation.
The court-appointed receiver for Commodities Online alleges Gallo along with another convicted felon, James Clark Howard, were running a Ponzi scheme, offering investors a chance to capitalize on the buying and selling of commodities. Gallo siphoned off more than $2.2 million from Commodities Online to businesses he personally controlled, including American Financial Solutions, the receiver has alleged in a civil lawsuit.
Zloch found Monday that there were 14 instances in which Gallo violated his probation. Thirteen involved him failing to file accurate financial reports with his probation officer and the last charge was related to him having contact with Howard after he had been warned Howard was a felon.
Jamie Benjamin, Gallo’s attorney, argued his client didn’t know he was supposed to list business bank accounts on his monthly reports to the U.S. Probation Office. When he was asked for more detailed financial information, he complied, Benjamin said.
The defense attorney said that many of the charges the probation officer had alleged were Gallo’s personal expenses were actually business expenses, such as the strip club trips.
Assistant U.S. Attorney Laurence Bardfeld countered that among the financial transactions Gallo failed to report was $80,000 put into bank accounts in his sons’ names.
Gallo apologized Monday to Zloch, saying he filled out the paperwork to “the best of my ability.” He had been just days away from completing his three years’ probation when he was accused of the violations.
“Eight days away and yeah, I put myself back in it,” he said.
Gallo was sentenced in 2008 in New Jersey for bank fraud, intent to distribute cocaine and transmitting a threat to injure. Court records do not detail the allegations that led to those charges.
The SEC issued subpoenas to Commodities Online in March 2011, but then rushed to place it in receivership three weeks later over fears the company’s funds were being raided, court records show. About $3.8 million began flowing to Mexico and Netherlands the day the subpoenas were issued, the SEC alleges.
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