Irvine money-manager Danny Pang treated investors’ cash “like his personal piggy bank,” a court-appointed receiver said.

The receiver, Robert P. Mosier, said Pang, the former chief executive of Private Equity Management Group, “may have misused, mishandled, mismanaged and even stolen investor funds.”

Mosier was appointed to take control of the company’s assets after the Securities and Exchange Commission sued Private Equity Management and Pang for fraud. Pang faces a separate federal criminal charge of structuring cash withdrawals to avoid reporting requirements.

Pang’s spokesman, Charles Sipkins, said Mosier “has vastly exceeded the proper scope of his assignments and duties, choosing apparently to act as prosecutor, judge and jury all rolled into one.”

Pang wants U.S. District Judge Philip S. Gutierrez to fire Mosier.

Mosier said Pang lavished investor money on himself and on his staff:

• He bought three jets for $35 million. Most of that may have been repaid from insurance after one of the jets crashed.
• He borrowed $6.9 million interest-free for himself and $16 million to keep his company afloat.
• As business faltered, he  gave his staff luxurious perks — including a $1.5 million trip to China in 2007 and a $1 million Disney cruise in December 2008.

Sipkins said Mosier has denied Pang access to information, excluded him from key interviews and given him no chance to respond.

“As a result,” Sipkins added, “Mr. Pang plans to file for the removal of this receiver and the appointment of a receiver who will fulfill his responsibilities fairly and objectively, including providing Mr. Pang the access he deserves to defend himself.”

Private Equity Management handled $823 million for Taiwanese investors. Mosier said the investments now are worth just $213 million to $426 million.

Among the reasons: Much of the money was tied up in hard-money loans that are now in default. A coal mine in which it invested sits on a military base . And many of the life insurance policies in which it invested could be contested, resulting in little or no return to investors.

Mosier wrote that “there is a very distant possibility” of repaying investors most of their money over the next 12 to 20 years — but probably only if additional cash is invested.

Documents filed in the SEC lawsuit this week shed new light on the abrupt federal actions against Pang and his company two weeks ago.

In mid-April, after a former top Pang aide accused him of fraud, Pang resigned, and the Private Equity board hired the law firm of Gibson Dunn & Crutcher to investigate.

Days later, on April 22, Gibson Dunn lawyers met with federal prosecutors and SEC lawyers, according to a sworn declaration by SEC attorney Rabia Cebeci filed Thursday . 

The Gibson Dunn group — including former top federal prosecutor Debra Yang — told government lawyers that Private Equity Management appeared to have used money collected for one investment to pay returns on another investment.  The Gibson Dunn lawyers also said “they were concerned about the possibility of Danny Pang dissipating PEMGroup’s assets.”

The SEC sued on April 24, winning a court order temporarily freezing Pang’s assets. Federal prosecutors filed the criminal complaint on April 28.

To read the receiver’s report (18 pages), CLICK HERE.

To read more on Danny Pang CLICK HERE.

Posted in: Crime • Government regulation • O.C. business news • fraud • SEC |

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