Financier Danny Pang defrauded investors of hundreds of millions of dollars

Financier Danny Pang defrauded investors of hundreds of millions of dollars,obtained a temporary order freezing his assets.As part of the SEC's civil lawsuit filed in federal court in Los Angeles, U.S. District Judge Philip Gutierrez froze the assets of Mr. Pang and the Irvine, Calif., businesses he ran, Private Equity Management Group Inc. and Private Equity Management Group LLC. The judge also appointed a receiver, Robert P. Mosier, to safeguard the existing assets.
SEC complaint against Pang SEC statement on Pang From the Archive
Highflying Financier Faces Questions 04/15/09Pang Firm Left Some Big Funds Unaudited 04/16/09China Business Leader Linked to Pang 04/17/09Pang Steps Aside as Head of Firm 04/17/09Taiwan Banks Probe PEMGroup Notes 04/23/09The judge ordered Mr. Pang to return money sent overseas and to surrender his passport. The investigation is continuing.Mr. Pang's investment practices came to light in a page-one article earlier this month in The Wall Street Journal. Mr. Pang stepped aside temporarily as chairman and CEO of PEMGroup shortly after the article appeared.The company hired law firm Gibson Dunn & Crutcher to perform an independent investigation. A company spokesman had no immediate comment on the SEC allegations. Mr. Pang, 42 years old, traveled to China two weeks ago for a religious pilgrimage, according to his spokesman.David Schindler, an attorney for Mr. Pang, said his client expects to be fully vindicated. He said Mr. Pang voluntarily returned to the U.S. more than a week ago to cooperate with PEMGroup's internal probe and is committed to saving the company.PEMGroup says it manages $4 billion, but the amount raised in Taiwan, where most of its investors were, was likely no more than $1 billion, according to people close to the matter. Ming-Daw Chang, director of the banking bureau under Taiwan's Financial Supervisory Commission, said the SEC move "could have a major impact" in Taiwan.

The SEC also accused Mr. Pang of lying about his past, saying PEMGroup falsely represented him as a former merger adviser at Morgan Stanley and said he held an M.B.A. degree from University of California, Irvine. Mr. Pang never worked at Morgan Stanley, nor did he attend or obtain any degrees from UC Irvine, the SEC said.

The SEC alleged Mr. Pang's fraud began at least in 2003 when he raised hundreds of millions of dollars from investors, mostly in Taiwan. Mr. Pang sold investors securities and told them he would earn enough profit to pay them returns through purchasing life-insurance policies at a discount, the SEC said. In truth, the SEC alleged, the life-insurance policies didn't generate enough profit to cover the cost of the premiums or meet the returns he promised to investors. PEMGroup instead paid investors from new money that was supposed to be invested in time-shares, the SEC said.In one instance, PEMGroup presented investors with a forged $108 million insurance policy to support its claim that one investment was entirely covered by insurance, the SEC said. The SEC alleged the insurance policy was for approximately $31 million. When asked by investors to view the policy, the SEC said, Mr. Pang had it altered to increase the amount of the policy. Investors also were shown the "bogus insurance policy" by PEMGroup in order to win their business, it said.Rosalind Tyson, director of the SEC's Los Angeles office, said, "Pang's alleged use of phony credentials and false insurance coverage to guarantee his investments underscores how critical it is for investors to exercise due diligence."