The Securities and Exchange Commission accused Irvine financier Danny Pang on Monday of defrauding investors of hundreds of millions of dollars and obtained a court order freezing his assets and directing Pang to surrender his passports.
In a complaint filed in federal court in Los Angeles, the SEC accused Pang of defrauding investors by misrepresenting his background and the safety of his company's investment products. The lawsuit also alleged that Pang used newer investors' money to make interest payments to earlier investors.
U.S. District Judge Philip S. Gutierrez froze Pang's assets and those of his company, Private Equity Management Group Inc., and requested that he return any "ill-gotten gains" and any money that might have been sent overseas. Many of Pang's clients lived in Taiwan, the SEC alleged. Gutierrez scheduled a May 11 hearing to consider whether to extend the emergency order.
The lawsuit did not say how much money Pang's firm controls, stating only that it had defrauded investors of "hundreds of millions of dollars."
Pang's attorney, David Schindler, said his client did not defraud investors. He said he would ask Gutierrez to withdraw the injunction and allow the company to resume control of its assets.
"We intend to contest this lawsuit. Moreover, we intend to demonstrate that Mr. Pang did nothing wrong. Mr. Pang looks forward to that opportunity," said Schindler, of Latham & Watkins in Los Angeles.
This month Pang temporarily relinquished control of his company, which he said would conduct an internal review of management policies. The firm's chief financial officer, Wilbur Quon, also stepped down temporarily.
In its complaint, the SEC alleged that Pang misstated to investors that he had earned a bachelor's degree and an MBA from UC Irvine when he had no such degrees. He also told investors that he had previously worked as a senior vice president and high-tech merger advisor with Morgan Stanley when he had no such experience, the suit alleged.
Pang's company has been offering securities since 2003, saying that it would invest in life insurance policies of seniors and in time-share real estate. It promised returns of 5.25% to 7% and said all investments were fully guaranteed by insurance policies, according to the SEC's complaint.
The SEC said the life insurance policies did not generate enough returns, so Pang paid investors' interest with money he accepted from subsequent investors in time-share real estate. It also accused Pang of presenting investors with a forged insurance policy that purported that the company's investments were backed by $108 million of insurance when the policy actually covered only $31 million.
Pang may be best known locally for the highly publicized 1997 shooting death of his wife, Janie Pang. A former stripper, Janie Pang was killed in the bedroom of the couple's upscale home in Villa Park in Orange County.
Newport Beach lawyer Hugh "Randy" McDonald was charged with murdering Pang's wife, but his trial ended with a hung jury. He was not retried. During the trial, McDonald's lawyers portrayed Pang as a shady businessman and high-stakes gambler and contended that prosecutors ignored evidence of Pang's ties to Taiwanese mobsters.