Money Manager Sought in L.A. Scam

For years, Korean immigrants who prospered running garment shops, gardening services and other small businesses admired Won Charlie Yi as a savvy investor with special contacts.

The 34-year-old money manager told clients he had an inside connection to Pacific Union Bank that would allow him to buy its stock at a discount, then deliver handsome profits when the shares rose in value, court filings say. And by all appearances, Yi was a success.

He drove luxury cars, including a bulletproofed BMW, and chartered jets to Las Vegas. Associates say he wagered $25,000 a hand on baccarat and blackjack. What’s more, his clients’ statements swelled with profits. He even hired major investors’ children to work at C+ Capital Management, headquartered in 14,000 square feet of granite, marble and glass on the 36th floor of Sanwa Bank Plaza in downtown Los Angeles.

Federal investigators say the elaborate show of success was just a cover for a fraud ring. Yi fleeced investors of at least $36 million, according to the Securities and Exchange Commission. The SEC has charged Yi and C+ Capital with civil violations of securities laws, and the FBI has accused Yi and two associates of intentionally overdrawing Wells Fargo & Co. bank accounts by more than $2 million before fleeing the country last month.

Frank N. Lee, an attorney for 22 investors who say they lost $14 million among them, believes the losses could total $70 million or more, with victims in South Korea as well as in the U.S. Some investors have conducted their own searches for Yi in South Korea, Lee said, and others think he may have fled to Vietnam because it has no extradition treaty with the U.S.

“Kidnap him and bring him to South Korea -- that’s what some people want to do,” Lee said.

He said that Yi’s clients, some of whom sold property, drew down home equity credit lines and liquidated certificates of deposit containing their life savings to invest with him, harbored extraordinary feelings of betrayal.

“When Charlie talked to them,” Lee recounted, “it was like, ‘I’m your Korean son that succeeded.’ ”

Court filings suggest that Yi targeted the Korean American garment industry in Los Angeles, starting in the late 1990s. One early investor was prominent entrepreneur Don Chang, founder of Forever 21 Inc., a Los Angeles retailer of clothing for young women.

Forever 21 Chief Financial Officer Larry Meyer said Chang lost money in two accounts he opened four years ago with Yi and where he deposited college funds for his daughters.

Other garment manufacturers and wholesalers turned over millions of dollars each to C+ Capital, according to Lee and court filings by the SEC and FBI.

“This is going to trickle down and affect the whole industry,” Lee said, predicting that some factory operators would have to fire their garment workers for lack of operating capital.

In a lawsuit filed May 25 in federal court in Los Angeles, the SEC accuses C+ Capital and Yi, the company’s president and chief executive, of the securities-law violations. In a search-warrant affidavit, FBI Special Agent B. Craig Mason says Yi, C+ Capital General Counsel Andrew I. Park and Vice President Jong-Jin Lee are believed to have committed conspiracy, wire fraud, mail fraud and bank fraud.

The three could not be reached for comment. No attorneys for them or for C+ Capital have appeared at court hearings in the case, and calls to C+ Capital’s offices went unanswered.

According to the FBI affidavit and SEC filings, Yi would tell investors he could make bulk purchases of stock in Pacific Union Bank, which focused on Los Angeles’ Korean community, at a discount from private sources.

To ensure that clients wouldn’t lose money, he said, he would sell the stock after it went up, put the initial investment in a cash or money market account and then trade additional stocks using only the profit from the first transaction.

Yi told clients that their accounts would be held by Carlin Equities Corp., a New York brokerage that he said maintained an office in Beverly Hills. The FBI says Yi worked as an account executive at Carlin’s Beverly Hills branch in 1996 but left in January 1997. Carlin closed the local office last summer.

Yi allegedly deposited investors’ checks into accounts he controlled, principally a Wells Fargo bank account that he opened in February 1997 in the name of “Won Charlie Yi doing business as Carlin Co.”

Lee and the FBI report said that by adding the Carlin name to the account, Yi was able to deposit checks made out to Carlin Equities Corp. and variations of that name into the account he personally controlled -- with investors none the wiser.

The scheme began unraveling after an announcement late last year that Hanmi Financial Corp., a Los Angeles bank, would buy Pacific Union for $295 million. Pacific Union shares, which had traded below $10 in October 2002, topped out above $30 on Feb. 27, and many of Yi’s clients were clamoring to cash out.

Investigators said he stalled them with various stories, including one about federal authorities temporarily freezing the accounts because so much money was going to overseas investors. The bank acquisition closed April 30, increasing pressure from the clients.

By the time investors started appearing in person at the lavish C+ offices in early May to demand their money, “Yi was not there,” the FBI’s Mason wrote.

As the scheme collapsed, Yi and his lieutenants deposited bad checks for more than $3 million in Wells Fargo accounts and then used his online business banking account to send money overseas, Mason said in the affidavit.

From May 3 through May 5, Yi wired 23 separate transfers of $100,000 each from his Wells accounts to accounts in South Korea, bank officials told Mason. Jong-Jin Lee, C+ Capital’s vice president, had flown to South Korea in April, and Yi and Park, the general counsel, followed him May 4, Mason said.

The three men then withdrew the funds from their South Korean accounts, the FBI agent said.

Wells spokeswoman Mary Trigg declined to comment beyond saying the bank was “cooperating fully with the FBI.”

Yi lulled many clients into thinking their funds were safe by showering them with paperwork, plaintiffs’ attorney Frank Lee said, including statements on Carlin Equities letterhead.

Mason said there was no evidence that C+ ever purchased Pacific Union Bank stock for clients.

Yi told the investors they wouldn’t have to pay him unless they made money, saying he would take a fee of 10% or 20% of any profits they made.

A former close associate, speaking on condition of anonymity, said Yi often described his background in the brokerage business, claiming, “I get sick and tired of seeing my clients pay fees whether or not they make any money.”

According to Frank Lee, Yi had played hard to get at first, saying “he didn’t really need more investors. You had to have at least a million.” But he said that changed toward the end, when smaller players in the garment industry, along with landscapers, pharmacists and other small-business owners, began to invest with Yi.

For example, Lee client Dae-Seung Park, a Los Angeles clothing wholesaler who has sued Yi and C+ Capital, said his wife wrote a check last November for $120,000 -- a large portion of their life savings -- based on Yi’s representations that he could buy Pacific Union stock for less than market prices.

Another investor, an immigrant who owned several businesses, not only handed Yi $2 million of his own money but also formed two partnerships through which 30 other people invested more than $6 million, according to court filings.

The investor “is very upset about losing other investors’ money,” Mason told the judge who issued a search warrant on C+ Capital’s offices late last month. Mason said the investor “was particularly worried about having to tell a 70-year-old investor from Glendale that his money was gone.”

Yi led a lavish lifestyle during his alleged scam. His former associate said he dressed in Armani fashions, spent $300,000 on a Lamborghini and $150,000 on a Ferrari that he later sold, and then purchased a customized BMW with bulletproof side panels and windows for $130,000.

The associate said Yi took gambling jaunts to Las Vegas at least twice a month. “I saw him drop $750,000 one weekend,” the associate said. “And I saw him win $2 million one weekend.”