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O.C. fund manager Danny Pang denies scheme

COURTS

The financier charged with a single count of structuring bank transactions to avoid currency reporting laws is free on $1-million bond following two days of trouble: an FBI arrest and SEC accusations.

April 30, 2009|Stuart Pfeifer
  • Danny Pang, 42, leaves federal court in Santa Ana. He was charged with a single count of structuring bank transactions to avoid currency reporting laws before being released on bail.
Danny Pang, 42, leaves federal court in Santa Ana. He was charged with a single… (Nick Ut / Associated Press )

Lawyers for Orange County financier Danny Pang -- who was released from custody Wednesday on $1-million bond -- said an independent, court-ordered review found no evidence that the Newport Beach man had operated a Ponzi scheme.

His release follows two days of trouble for Pang, accused by the Securities and Exchange Commission on Monday of defrauding investors out of hundreds of millions of dollars and arrested by FBI agents Tuesday on suspicion of violating currency reporting laws.

U.S. Magistrate Judge Robert N. Block declined federal prosecutors' request that Pang be jailed without bond, saying the government had not demonstrated that he stole from clients or was a significant flight risk.

Block based the bail decision solely on allegations that Pang cashed 38 checks for slightly less than $10,000 to avoid detection by the government.

"This is not exactly the crime of the century," Block said.

Handcuffed while in court Wednesday, Pang, 42, wore gray pinstriped slacks that sagged without a belt and a wrinkled white dress shirt. He appeared in good spirits, joking with courtroom personnel and laughing when he spoke to the FBI agent in charge of the case.

One of Pang's attorneys, Allan H. Stokke, showed his client an FBI affidavit that outlined some of the allegations against him.

"No," Pang said, chuckling. "They're wrong."

The judge gave Pang's relatives two weeks to post $750,000 of real estate equity as collateral for the bail. He ordered Pang to stay at home -- monitored electronically -- and gave him permission to leave his house only to meet with attorneys, work or for medical appointments.

In its lawsuit, the SEC alleged that Pang had used money from new investors to make interest payments to earlier investors, a Ponzi scheme. The commission also alleged that Pang misstated to investors that he had earned two degrees from UC Irvine when he had none and that he had previously worked for Morgan Stanley when he had not.

On Monday, U.S. District Judge Philip S. Gutierrez froze Pang's assets and those of his company, Private Equity Management Group Inc., and instructed Pang to surrender his passports, which he did.

Gutierrez also appointed Robert P. Mosier receiver and put him in charge of Pang's Irvine company, which reportedly controls more than $1 billion in assets from Taiwanese investors.

Another attorney for Pang, James Riddet, said in an interview that the receiver had found that the company has more than $1 billion in assets on hand and is not operating a Ponzi scheme.

Mosier, the receiver, could not be reached.

"There's no evidence to support an allegation that there's a Ponzi scheme," Riddet said. "They took it into receivership because they believed the contrary, and now it appears they're wrong."

During the bail hearing, Assistant U.S. Atty. Joseph T. McNally said prosecutors were concerned that Pang would flee the country if released because he has traveled extensively in China and Taiwan and has significant resources.

After the hearing, McNally declined to address Riddet's assertion that the receiver had found no evidence of a Ponzi scheme. "We'll continue our investigation and wait to hear from the receiver," he said.

Pang, who was born in Taiwan, moved to the United States in his teens and became a citizen in 1990. He made headlines in 1997 when his wife was shot to death in the couple's Villa Park home, a crime for which a lawyer who had worked for Pang was arrested but not convicted.

Pang has since remarried and lives with his wife and two children in Newport Beach. Pang was with his family in China on a "religious retreat" when allegations about the alleged Ponzi scheme surfaced in a Wall Street Journal article this month, Riddet said.

Pang returned to California, agreed to temporarily step down as chairman of his company and allow a law firm to conduct an independent review of the company's management practices.

Taiwanese banks, not private individuals, invested in Pang's company, said a third attorney for Pang, David Schindler of Latham & Watkins in Los Angeles. He said the SEC and FBI had acted too swiftly and were relying on a former Pang associate who is in the midst of a legal dispute with the company.

"In a post-Madoff world, the government doesn't want to screw up again, and that's laudable," Schindler said. "But this isn't the way to do it. You don't shoot first, aim, get ready next."

Pang was not asked to enter a plea during Wednesday's hearing. The judge scheduled a May 19 preliminary hearing, the next date that Pang would be required to report to court.

He is charged with a single count of structuring bank transactions to avoid currency reporting laws. According to an affidavit, Pang, his friends and his relatives cashed 38 checks at the East West Bank branch in El Monte for amounts ranging from $9,500 to $9,900 to avoid laws that require banks to report transactions of $10,000 or more to the government.

Pang used the cash to buy gold bullion, which he stored in a safe concealed in a bedroom closet at his house, a former Pang associate told the FBI.

The FBI's affidavit, used to get a search warrant for Pang's house, portrayed Pang as security-obsessed, noting that he installed video cameras at his residence in the gated Dover Shores community and surrounded himself with large men.

--

stuart.pfeifer@latimes.com

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