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PEMGroup founder Pang arrested

(China Daily)
Updated: 2009-04-30 07:49

Danny Pang, founder and ex-chief executive officer of Private Equity Management Group Inc, was arrested on federal charges that he evaded transaction-reporting laws by cashing checks for amounts of less than $10,000.

Danny Pang. Sketch by Liu Yanfeng

Pang, 42, either personally or through his personal assistant, cashed 38 checks, sometimes two a day, in amounts of $9,500 to $9,900 to avoid filing a currency-transaction report, US Attorney Thomas O'Brien said on Tuesday in a statement. Pang faces as long as 10 years in prison if convicted of "structuring" cash transactions, according to the statement.

The Securities and Exchange Commission filed a lawsuit on Friday against Pang and PEMGroup, accusing him of bilking investors by falsely portraying returns as coming from investments in timeshare real estate and seniors' life insurance policies. Regulators say the money in fact came from a Ponzi scheme in which he used funds raised from newer investors to pay earlier ones.

He was arrested at his lawyer's office in Santa Ana on charges he withdrew about $360,000 from a company account through dozens of small transactions.

A federal court froze his assets and those of his two California companies -- Private Equity Management Group Inc. and Private Equity Management Group LLC. The judge also appointed a receiver responsible for safeguarding assets held by Pang's firms.

A former PEMGroup president told a Federal Bureau of Investigation agent that Pang had told him he used the money from the cash withdrawals to buy gold bullion, which he kept in a safe in his home so he would have something to live off "in the event something bad happened to Pang," according to an affidavit in support of Pang's arrest.

Pang started cashing the checks that show the structuring pattern in June 2007 and continued through January of this year, according to the affidavit.

Pang's attorney, David Schindler, declined to comment on the charges because he had not seen the evidence.

"These allegations have nothing to do with the false allegations concerning PEMgroup," Schindler said. "He looks forward to being fully vindicated."

He said his client voluntarily returned to the United States from China last week to cooperate with investigators.

After his former partner, Nasar Aboubakare, claimed the business was built around a Ponzi scheme, Pang stepped aside as chairman and chief executive officer. The company appointed a special committee to investigate the allegations.

Pang founded a $4 billion international investment firm and lived lavishly in Newport Beach. He was to spend the night in jail and face arraignment Wednesday, prosecutors said.

The SEC accused Pang and his companies of paying existing investors with funds raised from new ones while claiming the returns came from proceeds on investments in life insurance policies of senior citizens and timeshare real estate.

PEMGroup also gave investors a forged $108 million insurance policy, the SEC said in an e-mailed statement. In addition, Pang lied about having worked at Morgan Stanley and about having received a MBA degree from the University of California, the SEC said.