OC Business News

Trustee: Restaurant king has no assets

Ronald Campbell — Wed, 01 Jul 2009 22:50:54 +0000

Laguna Niguel restaurant king John Gantes has no assets with which to pay creditors, the bankruptcy trustee has concluded.

Gantes' Burger King in Santa Ana

The trustee, Jack Wolfe, filed his report in U.S. Bankruptcy Court in Santa Ana on Monday. It means that most of Gantes’ creditors probably will never collect a dime.

Gantes listed $345 million in debts and just $2.7 million in assets when he filed a Chapter 7 bankruptcy petition in December. Most of the debts consist of personal guarantees he signed to get loans for his restaurants.

At his peak in mid-2008 Gantes owned a hotel and 110 franchised restaurants stretching from Las Vegas to Washington State, including more than a dozen Burger Kings, Arby’s and Coco’s in Orange County. He closed several restaurants but is trying to reorganize most of them through more than two dozen Chapter 11 cases. Those cases are legally separate from Gantes’ personal bankruptcy.

Seven creditors have sued Gantes in bankruptcy court seeking nearly $12.5 million. One of those creditors, San Diego Private Bank, is objecting to the entire bankruptcy. Until its objection is resolved, Gantes’ attorney William Burd said, the court won’t discharge Gantes’ debts.

Here are our previous stories on Gantes:

In other news:

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O.C. Register workers get 5% pay cut

Mary Ann Milbourn — Tue, 30 Jun 2009 00:29:27 +0000

Workers at the Orange County Register will get a 5% cut in pay effective July 13 as part of an across-the-board reduction being implemented by its parent company, Irvine-based Freedom Communications Inc.

The company, like media firms across the country, has struggled financially due to the weak economy, declining advertising and circulation and new competition from the Internet. At the same time Freedom is laboring under $700 million in debt, which it took on in 2004 to pay members of the family-owned company who wanted to cash in their shares.

Over the last couple of years, Freedom has implemented a range of cuts including voluntary severance, layoffs and ending the company’s matching contribution to the 401-K plan. During the second quarter, all employees had to take a five-day unpaid furlough.

Burl Osborne, Freedom’s incoming interim chief executive, said the executive team considered and rejected other actions, including additional furloughs in the last two quarters of the year and further layoffs.

“There is no best way,” he said. “This, I believe, is the least worst way. No one is enjoying this.”

He said the goal was to preserve the quality of the products the company produces.

“We felt that taking this action provided the best opportunity to maintain an organization that will meet the needs of our advertisers, readers and viewers,” Osborne wrote in a memo to colleagues. “Equally important, it will help us deliver on our financial commitments in 2009 and set us up for a stronger 2010.”

He said he is convinced the company will recover once the economy is on the mend.

“I do believe there is a future for us,” he said. “The trick is to survive until we get to the other side of this very deep river we have to cross.”

Other media companies are making similar cuts. Employees at the New York Times got a 5% pay cut earlier this year while unions representing workers at the Denver Post approved an 11.7% decrease in benefits, including a 7.4% reduction in pay.

Last week, the Boston Newspaper Guild reached a tentative agreement with the New York Times Co., parent of the Boston Globe, after contentious negotiations during which the Times threatened to shut down the paper. The guild agreement provides for a 5.94% pay cut, five unpaid days of furlough, two days of unpaid vacation and one unpaid holiday.

Freedom Communications owns 33 daily newspapers across the country, more than 70 weekly newspapers, magazines and other specialty publications and seven broadcast stations.

Broadcom raises bid for Emulex

Mathew Padilla — Tue, 30 Jun 2009 00:04:36 +0000

Broadcom Corp. in Irvine today raised its bid 19% for Costa Mesa-based Emulex Corp. to $11 per share in cash, raising the stakes in what has become a hostile takeover attempt.

“This is the best offer Broadcom intends to make,” the company said in a statement. “The offer represents a premium of 66% to Emulex’s closing stock price on April 20, 2009, the day before Broadcom announced its initial offer.”

Emulex closed today at $10.88 per share. Broadcom released its offer after markets closed in New York.

A spokeswoman for Emulex had no immediate comment, but the board spurned the original offer as “opportunistic.”

Broadcom has been trying to bypass Emulex management and get approval directly from Emulex shareholders.

But in a letter to Emulex’s board, Broadcom CEO Scott McGregor said his company will stop soliciting Emulex shareholders and will dismiss a lawsuit against Emulex’s effort to halt a takeover.

Broadcom is extending its offer 10 days to July 14.

In other news…

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Madoff got what public demanded

Mathew Padilla — Mon, 29 Jun 2009 23:10:13 +0000

Bernard Madoff was effectively sentenced to life in prison today, which is exactly what the public expected and demanded, said John Hueston, a former prosecutor.

U.S. District Judge Denny Chin in New York, who sentenced Madoff to 150 years in prison, was under intense pressure to make an example of the epic swindler, Hueston said. If the judge had given Madoff a shorter sentence with the possibility he would live to be a free man, there could have been “rioting in the streets,” he said.

Hueston, now in private practice with Irell & Manella, was lead prosecutor against Kenneth Lay and Jeffrey Skilling, former CEOs of failed energy trader Enron Corp.

Madoff pleaded guilty on March 12 in a pyramid scheme that may have reached $65 billion in both real and phantom investments.

The sentencing could help restore some investor faith in U.S. financial markets, as did prosecutions in the Enron case, Hueston said.

However, there remains a lingering scar over the failure of the Securities and Exchange Commission to stop Madoff, even after the agency was apparently warned that something wasn’t right by another money manager, Hueston said. (Bloomberg has a story on SEC’s handling HERE.)

Henry Pontell, professor of criminology at UCI, said the Madoff case is important, but also a distraction from larger issues.

“Bernie Madoff is the best gift Wall Street ever had,” Pontell said. “He’s deflected attention away from systemic fraud that was a major part of this current economic meltdown.”

To date, the only high profile case against a player in the credit boom is the SEC’s civil charges against Angelo Mozilo, the former founder and chief executive of Countrywide Financial, for fraud and insider trading, Pontell said.

“If that is the best they can come up with against someone like that, you can kiss all the major prosecutions goodbye” Pontell said.

David Siegel, a lawyer for Mozilo, disputed the SEC’s charges when they were announced earlier this month. He said the suit “does not reflect a balanced or fair consideration of the facts or the law” and denied his client “knew about some undisclosed risk.”

To be sure, in June 2008 the Federal Bureau of Investigations arrested two former Bear Stearns hedge fund managers for allegedly misleading investors about the health of two funds that failed.

Still, the FBI has never been given the resources it needs and has asked for, to expand fraud investigations, Pontell said.

In other news…

Post from: OC Business News

Receiver: Financier kept $37 million from fund

John Gittelsohn — Fri, 26 Jun 2009 20:54:13 +0000

Orange County investment adviser Danny Pang and his family siphoned $52 million from investors who poured $823 million into a partnership that is now hundreds of millions of dollars in the red, says a court-appointed receiver in a newly disclosed report.

Pang, 42, of Newport Beach, personally took $37.3 million from 2004 to April of this year, according to the report by Mosier & Co. of Irvine, the court-appointed receiver. The report was among numerous documents unsealed Thursday in a case in U.S. District Court in Los Angeles.

Mosier’s report says Pang’s Irvine-based company, the Private Equity Management Group Inc., paid all employees a total $83 million in compensation from 2004 to 2009, almost two-thirds of which directly benefited Pang and his family.

Pang’s attorneys disputed the allegations, writing in court papers that the $83 million is “demonstrably false and was clearly inserted as a further attempt to inflame third parties.”

The report says Pang’s wife, Sheena Pang, received $1.8 million and Pang’s alleged bookie received $1.67 million. Other payments went to Pang’s driver, his brother, his son and an alleged girlfriend. Another $4.2 million could not be accounted for by Mosier.

Pang’s attorneys called those allegations “office gossip, without any support.”

Mosier’s report says Pang paid himself before his investments yielded a profit. Most of the company’s funds, primarily raised from investors in Pang’s native Taiwan, were put into financial instruments based on trading life insurance policies. Pang’s company also has investments in Russia, Costa Rica and private jets.

“As time marched forward, it became clear that this novel approach was only possible by soliciting new investor monies to continue prior investments and pay for the accelerated spending undertaken by Mr. Pang,” Mosier’s report said.

Mosier’s report estimated Pang’s clients have lost up to 80 percent of the $823 million they invested with him.

Pang’s attorneys dispute the receiver’s figures. They cite a PEM Group presentation that shows $568 million of investor money was spent on assets with a $1 billion face value and that $159 million was repaid to investors.

On April 22, the U.S. Securities and Exchange Commission seized Pang’s assets and filed suit, alleging he schemed to defraud investors.

Pang has denied the fraud and argued that the SEC has no right to sue him, because he sold the investments outside the United States. He sought to keep the receiver’s report sealed and has tried to avoid giving a deposition for the SEC case, citing concerns that his statements could be used against him in a separate criminal case.

On April 29, federal prosecutors filed a criminal case alleging Pang sought to conceal large cash transactions from U.S. authorities. Pang has denied the allegations, but has yet to formally enter a plea. His arraignment date is July 26.

A hearing on several matters in the SEC case is scheduled for Monday in U.S. District Court in Los Angeles.

Pang first made headlines in 1997, when his wife, Janie Pang, was shot to death in the couple’s Villa Park home. A trial in the case ended with a hung jury and the crime remains unsolved.

The latest news was first reported by the Wall Street Journal, which filed motions to unseal the court documents.

To see the most recent receiver’s report, CLICK HERE.

To see Pang’s attorneys’ response, CLICK HERE.

Investors with O.C. financier Pang could lose up to $654 million

Mary Ann Milbourn — Fri, 26 Jun 2009 15:43:56 +0000

Photo by Bloomberg News

People who invested with Danny Pang’s Irvine-based Private Equity Management Group Inc. could lose up to $654 million, reports the Wall Street Journal today.

Court documents also revealed that Pang took “at least $83 million in allegedly inflated fees, loans and salary” from the company just before it was seized by federal regulators in April, said the paper.

The Wall Street Journal said a spokesman for Pang had no immediate comment, however, his attorneys in a court filing called the allegation he was paid $83 million “demonstrably false.”

Pang is accused of a massive investment fraud.

The Wall Street Journal cited several internal documents that were unsealed by the court including:

A memo from the company’s then-general counsel saying he was “seriously concerned” about the practice of loaning investor funds to Pang and PEMGroup affiliates.
An agreement signed by Pang April 9 pledging some of his personal properties to a PEMGroup affiliate as security for $9.6 million in loans previously taken from investors.
A filing showed that PEMGroup transferred in late 2007 at least $10 million to an entity controlled by Mr. Pang, which he then used to buy a property in Newport Beach that is the site of Joe’s Crab Shack.

Read the full story HERE.(subscription required)

See these earlier on Pang and his legal problems …

See these other stories on Orange County’s business legal problems …

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Another firm opposes O.C. tech merger

John Gittelsohn — Wed, 24 Jun 2009 21:32:42 +0000

Proxy Governance, a Virginia firm that advises investors, says shareholders of Emulex Corp. should reject the hostile takeover attempt by Broadcom Corp., because the bid of $9.25 a share is too low.

“The offer of $9.25, clearly, is an inappropriate anchor for any potential discussion of a sale, regardless of where shares traded in April,” the Proxy Governance analysis said.

Broadcom announced its offer on April 21, when Emulex was trading for $6.61. Emulex closed Wednesday at $10.67, down 8 cents. Broadcom closed Wednesday at $24.44, up 24 cents.

Emulex’s board has rejected the Broadcom offer as “opportunistic,” because it was made when the Costa Mesa company’s shares were trading at a low price. Emulex has filed suits in Orange County Superior Court and U.S. District Court in Santa Ana to block to takeover.

Irvine-based Broadcom wants Emulex shareholders to support a special meeting to amend Emulex’s bylaws to elect a new board and allow the possibility of a takeover. The Proxy Governance report supports the rights of shareholders to call a special meeting, but wants a higher threshold than the 10% level of support from shareholders that Broadcom proposes.

Broadcom CEO Scott A. McGregor issued the following statement in response to the new report:

Proxy Governance’s recommendation today in favor of the right of shareholders to hold a special meeting is a positive development that shifts the leverage away from Emulex’s insular board, and reinforces our view that Emulex shareholders should be given the right to make their voices heard at a special meeting of shareholders At the same time, we disagree with PROXY Governance’s conclusion with respect to the other proposals in Broadcom’s Consent Solicitation. First and last, the provisions in this Consent Solicitation are about Emulex shareholders and their right to make a decision. We urge Emulex shareholders to vote for all proposals in our Consent Solicitation so that they have a full and unfettered opportunity to be heard on our offer.

Emulex CEO Jim McCluney said:

We are pleased that Proxy Governance recommends rejecting Broadcom’s request for a special meeting where Broadcom would attempt to replace the current Emulex Board with hand-picked Broadcom nominees who we believe would support their grossly inadequate offer.

Broadcom, which makes semiconductors for communications devices and other electronic products, wants to acquire Emulex to extend its technology portfolio to include the type of industrial-strength networking and storage devices Emulex produces.

The Proxy Governance report follows a similar finding by Glass Lewis & Co., another consulting firm for institutional investors.

More stories on Orange County technology companies …

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Bookkeeper gets 41 months for embezzling

John Gittelsohn — Tue, 23 Jun 2009 17:37:34 +0000

(UPDATED with comments from defense attorney)

The bookkeeper for a small Westminster paper products company has been sentenced to 41 months in federal prison and ordered to repay $1.8 million she admitted to embezzling.

Foifua Atoafa appeared in U.S. District Court in Santa Ana Monday and was ordered to report to prison on or before July 2. Atoafa agreed in January to plead guilty to three counts of wire fraud over a seven-year period for depositing almost $1.8 million in checks paid to her employer, Tinnell Fibre, into a personal bank account.

The sentence requires Atoafa, 44, to pay Tinnell $100 a year during her imprisonment and at least $1,000 a month after her release as restitution for her embezzlement.

The sentence was harsher than the 33 months prosecutors had recommended.

“She was quite shocked at the increased time,” said Atoafa’s attorney, Andrew Westover.

Westover said Atoafa’s scheme started by accident.

“It’s something that sort of fell in her lap and blossomed out of control,” Westover said. “It was a small amount each month and it just grew and grew exponentially.”

Westover said Atoafa regretted the scheme and the harm she caused her employer, whom she will probably never be able to repay.

“She’s genuinely remorseful,” Westover said.

The prosecution painted a different picture.

“While the defendant has accepted responsibility and expressed what the government believes to be genuine remorse for her conduct, defendant nonetheless defrauded Tinnell for almost seven years and only stopped because she believed she could no longer conceal her fraud,” the prosecution’s sentencing recommendation said. “Had Tinnell’s bookkeeping records not been lost such that defendant could no longer keep her fraud secret, defendant’s fraud, in all likelihood, would be ongoing today.”

Messages left with Tinnell Fibre were not immediately returned.

To read a previous story about Atoafa, CLICK HERE.

To read the prosecution sentencing memo, CLICK HERE.

To read the defense sentencing memo, CLICK HERE,

Fake lawyer ordered to stay in jail

John Gittelsohn — Tue, 23 Jun 2009 00:30:53 +0000

A U.S. Magistrate ordered a Corona del Mar man back to jail today because he allegedly attempted to impersonate an attorney while on parole after serving four years in prison for impersonating an attorney.

Harold David Goldstein, 64, was sentenced to 84 months in prison in 2005 after pleading guilty to impersonating an attorney. He was released May 1. On May 26, U.S. District Court Judge David O. Carter called Goldstein back into court and barred him from posing as an attorney or offering any legal services without permission of his parole officer.

On June 1, the FBI received a tip from a recent law school graduate that Goldstein had advertised on Craigslist that he was a “retired lawyer” who needed help for cases he could not handle.

On June 2, two FBI agents posing as job candidates responding to the ad recorded Goldstein describing his business. In one transcript, Goldstein described himself as a lawyer with a license from Louisiana who also practices in federal court.

On June 7, Goldstein was arrested and held at the Metropolitan Detention Center in Los Angeles, leading up to today’s hearing.

Goldstein took the stand today despite the advice of his attorney. He denied he violated the terms of his release, likening his advertisement and job recruiting to a guy in a bar who tells the guy next to him that he’s a doctor.

“Everybody lies,” Goldstein said. “I did not provide legal services. I was just talking about it.”

U.S. Magistrate Marc Goldman rejected Goldstein’s defense, saying his offer was more than talk in a bar.

“This was made to practicing lawyers as well as law students,” Goldman said.

Goldman ordered Goldstein to formally be sentenced by Carter, who is traveling out of the country. A sentencing date has not been set.

Goldstein’s conviction for impersonating an attorney came after he spent more than a dozen years in prison for a variety of schemes dating back to the 1970s, including investments in non-existent gold and oil deals.

“I have no idea why he keeps getting caught,” said Andrew Stolper, the assistant U.S. attorney who prosecuted Goldstein. “It’s disappointing to find Mr. Goldstein up to his old tricks.”

Shareholder group opposes O.C. tech merger

John Gittelsohn — Mon, 22 Jun 2009 22:35:04 +0000

A San Francisco-based shareholder group urged its clients to oppose the hostile takeover of Emulex Corp. by Broadcom Corp.

Glass Lewis & Co., which provides analysis to subscribing institutional shareholders that manage more than $15 trillion in assets, said Broadcom was not offering enough money for Emulex.

On April 21, Broadcom announced an unsolicited cash offer of $9.25 a share for Emulex.

Emulex, which is based in Costa Mesa, closed Monday at $10.65, down 40 cents. Irvine-based Broadcom closed at $24.63, down 86 cents.

“In our opinion, we find no reason that Emulex should pursue a sale or other strategic transaction for the Company at this time as the Company’s prospects appear to be strong in the short to medium-range,” the Glass Lewis report said. “Emulex’s shares have traded above the Offer price per share since the announcement.”

Glass Lewis also urged shareholders to reject Broadcom’s request for a special Emulex shareholder meeting to name a new board and to amend bylaws that stand in the way of a hostile merger, which Emulex’s current board unanimously rejected.

Broadcom said the Glass Lewis recommendation “stands on its head accepted principles of good corporate governance in general, and Glass Lewis’s guidelines in particular. Emulex shareholders should not be misled by these confusing actions. Given the continued insistence of the Emulex Board on entrenching itself, Emulex shareholders have one logical choice to be heard: to support this Consent Solicitation.”

Broadcom makes a portfolio of semiconductors for communications and computer networking. Broadcom sees Emulex, which makes industrial-strength adapters and other devices for computer networking and information storage, as a good extension of its product line.

To read more on how the merger has roiled Orange County, see Tech tycoons’ battle is a personal one.

OC Business News

Trustee: Restaurant king has no assets

O.C. Register workers get 5% pay cut

More stories on Orange County media …

Broadcom raises bid for Emulex

Madoff got what public demanded

Receiver: Financier kept $37 million from fund

More business stories on Orange County legal problems …

Investors with O.C. financier Pang could lose up to $654 million

Another firm opposes O.C. tech merger

Bookkeeper gets 41 months for embezzling

More stories about Orange County business legal problems …

Fake lawyer ordered to stay in jail

More stories on Orange County business legal problems …

Shareholder group opposes O.C. tech merger

More stories on Orange County tech companies…