Taiwanese-American financier Danny Pang (彭日成), accused by US federal regulators of defrauding investors out of hundreds of millions of dollars, was arrested on Tuesday by the FBI on charges he withdrew about US$360,000 from a company account through dozens of small transactions so he would not have to report the sum to federal regulators.
The US attorney’s office said the founder and former chief executive of the Private Equity Management (PEM) Group was arrested at his lawyer’s office in Santa Ana, California.
The Securities and Exchange Commission filed a lawsuit on Friday against Pang and Private Equity Management Group LLC, accusing him of bilking investors by falsely portraying returns as coming from investments in timeshare real estate and seniors’ life insurance policies. Regulators say the money in fact came from a ponzi scheme in which he used funds raised from newer investors to pay earlier ones.
A federal court froze his assets and those of his two California companies, Private Equity Management Group Inc and Private Equity Management Group LLC. The judge also appointed a receiver responsible for safeguarding assets held by Pang’s firms.
Pang founded a US$4 billion investment firm and has lived lavishly in Newport Beach.
He was to spend the night in jail and face arraignment yesterday, prosecutors said. He faces a maximum of 10 years in federal prison if convicted of structuring the cash transactions.
About 16,000 Taiwanese investors purchased more than US$700 million in securities sold by the PEM Group, Financial Supervisory Commission (FSC) Chairman Sean Chen (陳沖) said yesterday.
The legislature’s Finance Committee later passed a resolution requiring the FSC to prohibit banks from selling foreign securities until an investigation into the PEM Group’s activities has been completed.
The FSC chief agreed to the temporary ban, but persuaded lawmakers to limit the restriction to sales of foreign investment products to individual clients so that companies could continue to buy foreign securities.
Chen said the FSC had approached an international agency for assistance in its investigation in the hope of minimizing the impact on Taiwanese investors.
The banks that sold PEM Group products have until tomorrow to file applications for assistance in protecting their clients’ rights, Chen said, but added that he was not certain whether investors would be able to get their money back.
“As long as their life insurance policies and other papers are valid, they will probably not lose their entire investment,” Chen told the Finance Committee.
He dismissed local media reports that as many as 20,000 investors had been affected.
Chen told the committee that the PEM Group had sold its products through six local banks: Standard Chartered Bank (渣打銀行), EnTie Commercial Bank (安泰銀行), Bank SinoPac (永豐銀行), Cosmos Bank (萬泰銀行), Hua Nan Commercial Bank (華南銀行) and Taichung Commercial Bank (台中商銀).
Standard Chartered sold about US$221 million in PEM Group securities, Hua Nan US$205 million, Bank SinoPac US$146 million, Taichung Bank US$70 million, EnTie Bank US$52 million and Cosmos Bank US$48 million, Chinese Nationalist Party (KMT) Legislator Alex Fai (費鴻泰) said.
Bank SinoPac said it would not rule out joining forces with other banks in seeking to claim compensation for their clients.