Probably a ‘Ponzi scheme,’ report says

Orange County financier Danny Pang, accused of defrauding Taiwanese investors, used their money as a “personal piggy bank” that funded a luxury lifestyle, including a $35-million fleet of jets and million-dollar cruises and vacations, a court-appointed receiver said Thursday.

In his first report since a federal judge temporarily put him in charge of Pang’s assets, receiver Robert P. Mosier said Pang appeared to have mismanaged an $800-million investment pool so badly that investors may have lost hundreds of millions of dollars.

Among the funds that Mosier said Pang misused was $1 million for a Disney cruise for employees and $1.5 million spent on a China vacation for his staff.

In addition to spending investor money on a “personal and corporate spending spree,” Pang paid existing investors with new investor money, “giving rise to claims of a Ponzi scheme,” Mosier said in a report filed with U.S. District Judge Philip S. Gutierrez.


The judge has scheduled a hearing Monday to consider extending Mosier’s role as receiver -- a move that Pang opposes.

In a statement Thursday, Pang spokesman Charles Sipkins said the receiver had exceeded the scope of his duties, “choosing apparently to act as prosecutor, judge and jury, all rolled into one,” with no opportunity for Pang to respond.

Pang intends to ask Gutierrez to replace Mosier with a receiver “who will fulfill his duties fairly and objectively,” Sipkins said. He said Pang has properly managed his clients’ assets.

The Securities and Exchange Commission filed a lawsuit last month, accusing Pang and his company, Private Equity Management Group Inc., of defrauding investors of hundreds of millions of dollars. At the SEC’s request, Gutierrez froze Pang’s assets and temporarily placed Mosier in charge of the Irvine company.

In the receiver’s court filing, Mosier suggested that his staff would need at least 60 more days to study PEMGroup’s finances, meet with investors and make additional recommendations.

FBI agents arrested Pang late last month after the U.S. Attorney’s Office charged him with cashing a series of checks for just below $10,000 to avoid having the transactions reported to authorities. Free on $1-million bail, Pang has said through his attorneys that he did nothing improper.

According to Mosier’s report, Pang launched his investment company in 2003 and accepted $823 million from investors that include eight financial institutions, seven investment companies and about 35 wealthy individuals, all based in Taiwan.

In a motion filed Thursday, SEC lawyers argued that Pang spent millions of investor dollars to fund the firm’s lavish operating expenses and funneled millions in investor funds to himself for personal use.


The motion requested that the receiver be allowed to retain control of PEMGroup and Pang’s personal assets.

Mosier’s report notes that the $823 million of investments is now worth between $213 million and $426 million. That’s because Pang “raked off the top” and some of the investments have problems, including a coal mine that is situated on a Chinese military installation and life-insurance policies that are extremely expensive to manage, according to the receiver’s report.