Gopi Krishna Vungarala, a former investment manager for the Saginaw Chippewa Indian Tribe of Michigan, recently was ordered to pay the tribe more than million for fraud. Vungarala was paid the money in commissions for investment deals while working for the tribe, which owns and operates the Soaring Eagle Casino in Mount Pleasant and the Saganing Eagles Landing Casino in Standish. The punishment was recommended by a panel of the Financial Industry Regulatory Authority, an independent, government-authorized regulatory authority over licensed brokers and brokerage firms. The U.S. Securities and Exchange Commission has the final say in regulatory matters.
In its decision, the panel wrote, “Through false and misleading statements, Vungarala led the tribe to believe that he did not receive commissions on the tribe’s transactions and that he had no conflict of interest.”
The panel’s investigation showed Vungarala accumulated a total of $9,682,629 in commission money from 2011 until he resigned in January 2015. During that time he did not reveal these earnings and made investment decisions that benefited him and harmed the tribe. The panel found Vungarala did not inform the tribe it could have saved $3.3 million in investment discounts because that would have reduced his commission.
The tribe hired Vungarala as its first in-house investment manager in 2008. Vungarala told the tribe he had “parked” his broker-dealer registration with Purshe Kaplan Sterling Investments, or PKS, where he formerly worked. In 2011, Vungarala shifted the tribe’s portfolio from stocks and bonds to real estate and business investments. He had the tribe make these investments through PKS, which paid him a commission for each tribal investment as though he still worked there.
In 2014, members of the tribe became suspicious of Vungarala after Vungarala opened a second yogurt shop and talked about his “significant charitable donations,” since the tribe only paid him an annual salary of $99,500, which rose to $120,000 when he left. Tribal officials asked him on numerous occasions if he made any earnings for himself or hid any earnings, Vungarala denied it. Earning commission money is a conflict of interest violation under tribal financial policy. FINRA began investigating Vungarala in mid-2014.
By the time Vungarala resigned in 2015, the tribe had invested nearly $200 million through PKS; the firm received about $11 million in commissions and Vungarala received $9.6 million, according to the panel. The tribe’s investments totaled 22 percent of its portfolio at the time of Vungarala’s departure, according to the tribe’s Interim Public Relations Director Erik Rodriguez. He said the tribe has since hired another in-house investment manager and filed a civil lawsuit against Vungarala and PKS.
Vungarala also is prohibited from doing business with any member of FINRA, which oversees thousands of brokerage firms and hundreds of thousands of registered brokers in the U.S.
Also, earlier this year, in an agreement with FINRA, PKS agreed to pay the tribe the $3.3 million that it could have saved in investment discounts. The firm also was fined $750,000 for failing to supervise the sales of these securities, FINRA said.
Although Vungarala is allowed to appeal the decision, Rodriguez said, “We are very pleased with FINRA’s involvement and everything they’ve done in bringing this to light for us.”
