Mortgage Firm CEO Jailed on Fraud Charges

A mortgage-lending firm chief who allegedly helped bilk investors out of more than $330 million surrendered to authorities Wednesday to face securities fraud charges.

Michael J. Fanghella, the chairman and chief executive of Carlsbad, Calif.-based PinnFund USA, is in prison pending a court appearance today.

Fanghella, 50, is accused of fraud in a civil lawsuit filed by the Securities and Exchange Commission.

He allegedly used the money to fund a lavish lifestyle. Federal investigators found a bill for a $120,000 Christmas party Fanghella hosted at Le Cirque, an upscale New York restaurant. The tab included bottles of wine worth $13,000.

Fanghella made no comment when he appeared before a magistrate Wednesday. His lawyer, Ezekiel Cortez, told reporters, “The truth will come out in time.”

Cortez declined to say where Fanghella has been since a U.S. District Court judge issued an arrest warrant in March, when Fanghella failed to comply with orders to detail and explain his financial assets. Cortez said only that his client had left the United States.

Federal officials say he stashed millions of dollars in a Barbados bank account.

At least 166 individuals and small groups invested in PinnFund, which sold mortgages to people with poor credit histories. Investors were given bogus financial statements showing a profit, the SEC alleges.

Investigators say early investors were paid off with money from later investors until the program collapsed after eight years.

Fanghella is accused of absconding with at least $107 million of the investment funds.

James L. Hillman, PinnFund’s president, is also accused in the SEC complaint. His trial is set for Jan. 8.

Fanghella’s girlfriend, Kelly Cook, is to appear in court in October. She allegedly received at least $10 million in gifts and cash from him, including a $5.2-million Orange County home.

PinnFund’s Web site lists 40 offices in 24 states.