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---1 STEPTOE & JOHNSON LLP
FRACIS J. BUR, JR (SBN 75970)2 fburk~~oe.com
SEON KI (SBN~166604)3 skim0lsteptoe.com
2121 Avenue of the Stars, Suite 28004 Los Angeles, California. 90067-5052
Telephone: (310)' 734-32005 Facsimile: (310) 734-3300
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7UNITED STATES DISTRICT COURT'
CENTRA DISTRICT OF CALIFORNIA
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17 Plaintiff Robert P. Mosier alleges as follows:
18 INTRODUCTION
Plaintiff .
. caseNo.:l7CViO 3669 (¡k,
COMPLAINT tljury Trial Demanded
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VS.
HSBC BANK USA, N.A,
Defendant.
19
20 Equity Management Group, Inc. ("PEMG, Inc."), a Nevada corporation with its
21 principal place of business in California and Private Equity Management Group, LLC
22 ("PEMG, LLC"), a Nevada limited liabilty company with its principal place of businessin California (collectively ~~PEMGroup") and their subsidiares and affiliates.
232. Defendat HSBC Ban USA, N.A. is a national association whose
24pricipal offce is in New York. HSBC acted as the Cash Custodian for PEMGroup's
25' affliates' proceeds of offerings.
263. Dany Pang (deceased) was the president and a director of PEMG, Inc.
27 Pang was also a managig member ofPEMG, LLC.28
1. Plaintiff Robert P. Mosier is a citizen of Cali fomi a and receiver for Private
COMPLAI
Doc. #600752 v.2
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4. Danny Pang, the PEMGroup Management Team (described below) and
the PEMGroup Directors (described below) (collectively, "the PEMGroup Management
Team") established so-called "special purpose vehicle" ("SPV") entities in the British
Virgin Islands which were affiliates of PEMGroup. Each SPY sold securities, and each
such offering was referred to as a "fund" or a "Tranche." These Spy funds or Tranches
were managed and controlled by Pang and the PEMGroup Management Team. They
raised $951 milion through a series of offerings, of which $823 milion remains
outstanding.
5. Commencing at least as early as July 2006, and continuing through at least
April 2009, Danny Pang and the PEMGroup Management Team formed and entered
into an unlawful conspiracy and agreement to loot PEMGroup and its affiiates by using
the proceeds of various offerings for a variety of ilicit and undisclosed purposes, which
included but were not limited to: (1) the purchase of impaired life insurance policies
from earlier Tranches; (2) milions of dollars in loans and excessive fees and
commission to PEMGroup to fund the company's exorbitant operating expenses, which
exceeded $100 milion; (3) milions of dollars in unsecured and undocumented personal
"loans" to Pang; (4) over $107 milion of excessive compensation, fees, commissions
and bonuses to Pang and the PEMGroup Management Team; and (5) hundreds of
milions of dollars of loans and investments in high risk nonconforming assets never
disclosed in the offering documents, most of which became substantially impaired.
None of these uses and/or misappropriations of funds were disclosed to the investors.
This looting activity injured PEMGroup and the SPVs, rendering them unable to pay
their debts.
6. As a further purpose of the conspiracy, Pang and the PEMGroup
Management Team, joined by HSBC, conspired and agreed to distribute false and
misleading Net Asset Value ("NA V") Reports to induce investors to maintain their
investments in the notes, bonds and other forms of debt offered by PEMGroup and the
Tranches, by lullng them into a false sense of security, and then to divert and
COMPLAINT
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misappropriate those funds for improper and unlawful purposes, and then to conceal the
diversion and misappropriation of the funds.
7. HSBC acted in concert with, knowingly and substantially aided and
abetted; assisted; encouraged; conspired with; authorized, requested, commanded,
ratified or recklessly tolerated the statements and actions of co-conspirators Pang and
the PEMGroup Management Team by creating, and sending, false and misleading
documents, omitting and misstating material facts; and misrepresenting the status and
valuation of the assets of the Tranches. Overt acts in furtherance of the conspiracy are
alleged through this Complaint and continued through at least April 24, 2009.
JURISDICTION AND VENUE
8. This Court has jurisdiction over this action pursuant to 28 D.S.C. §§ 1332,
1348 because the amount in controversy exceeds $75,000 and there is complete
diversity of citizenship. Plaintiff Robert P. Mosier also has jurisdiction in this District
pursuant to D.S.C. § 754, which vests him "with complete jurisdiction and control of
all" property located in this District.
9. Venue is proper in this district pursuant to 28 D.S.C. § 1391 because
certain of the transactions, acts, practices and causes of conduct occurred within this
District and the Plaintiff Robert P. Mosier was appointed receiver in this district.
RECEIVER STANDING
10. Robert P. Mosier has standing to bring this action pursuant to 28 D.S.C. §
754, which provides: "A receiver appointed in any civil action or proceeding involving
propert, real, personal or mixed, situated in different districts shall, upon giving bond
as required by the court, be vested with complete jurisdiction and control of all such
property with the right to take possession thereof. He shall have capacity to sue in any
district without ancilary appointment."
PARTIES
11. Robert P. Mosier was appointed as permanent receiver ofPEMG, Inc. and
PEMG, LLC, and their subsidiaries and affiiates, with full powers of an equity receiver,
including, but not limited to, full power over all funds, assets, collateral, premises
COMPLAINT
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(whether owned, leased, occupied, or otherwise controlled), choses in action, books,
records, papers and other real or personal propert, including notes, deeds of trust and
other interests in real property, belonging to, being managed by, or in the possession of
or control of PEMGroup, and their subsidiaries and affiliates.
12. Defendant HSBC Bank USA, N .A. ("HSBC") is a national association
with its principal office in New York. HSBC has over 470 bank branches throughout
the United States and is a member of the FDIC. HSBC provides commercial banking
services to its customers.
13. PEMG, Inc. offered and sold securities issued by various entities and
affiiates it controlled. PEMG, Inc. is a Nevada corporation located in Irvine, California.
Danny Pang ("Pang"), as its president and a director, controlled and directed the actions
and operations of this entity. PEMG, Inc purported to invest in life insurance policies
and interest in timeshare-related assets.
14. PEMG, LLC is a Nevada limited liability company located in Irvine,
California. Pang, as a managing member, controlled and directed the actions and
operations of this entity. PEMG, LLC took equity positions in certain investments made
by PEMG, Inc.
OTHER PERSONS
15. Danny Pang (deceased) resided in Newport Beach, California. Danny
Pang had effective control of and access to at least some of the bank accounts into which
investor funds were placed. Pang also controlled and directed the actions of Life
Settlement Partners, Inc., Life Settlement Partners Corporation and Nevada Capital
Holdings, Inc.
16. The PEMGroup Management Team consisted of panny Pang (Director,
Chairman, CEO), Leon Chan (Director, Co-President), Robert Anderson (Director, Co-
President), Nasar Aboubakare (Director, Former Vice President), Steven Blair (General
Counsel), Todd Gilespie (Managing Director), Wilbur Quon (Director, CFO), Peter
Paul Mendel (Director, Chief Compliance Officer, Former General Counsel), Anthony
Bufinsky (Managing Director), Sandra Chang (Managing Director), Andrew Shayne
COMPLAINT
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COMPLAINT
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1. GVECR Dl Notes, November 15,2005, $1,000,000, lIT;
m. GVECR D2 Notes, November 15,2005, $1,493,800, lIT;
n. GVECR El Notes, November 15,2005, $2,500,000, lIT;
o. GVECR E2 Notes, November 15,2005, $2,472,500, lIT;
p. GVECR B Notes, January 2,2006, $5,000,000, Coretech;
a. GVECR PI Notes, March 21, 2006, $4,500,000, TruswellSecurities Investment Trust;
r. GVECR IV Notes A, July 26, 2006, $75,120,000, Standard
Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank;
s. GVEC II CDO Series 2006, August 1, 2006, $32,000,000, Bank
SinoPac;
t. GVEC II Debentures Series 2006-A, October 10, 2006,$55,000,000, Bank SinoPac;
u. GVECR IV Notes C, December 7, 2006, $100,050,000, Standard
Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank;
v. GVECR IV Notes D, December 28, 2006, $79,960,000, Standard
Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank;
w. GVECR II Debentures Series 2006-A-l, January 1, 2007,
$5,000,000, Hua Nan Investment Trust Corporation;
x. GVECR II Debentures Series 2006-A-2, January 1, 2007,
$5,000,000, Hua Nan Investment Trust Corporation;
y. GVECR II Debentures Series 2006-A-3, January 1, 2007,
$5,000,000, Hua Nan Investment Trust Corporation;
z. GVECR II Debentures Series 2006-A-4, January 1, 2007,
$5,000,000, Hua Nan Investment Trust Corporation;
aa. GVECR II Debentures Series 2006-A-5, January 1, 2007,
$2,460,000, Hua Nan Investment Trust Corporation;
bb. GVECR III Notes - Series 2007 A-4, April 2, 2007, $16,870,000,
Cosmos Bank, Entie Bank;
COMPLAINT
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cc. GVECR II Debentures Series 2007 A, May 9, 2007, $12,560,000,
Hua Nan Commercial Bank Ltd. Trust Dept.;
dd. GVECR II Debentures Series 2007 B, July 2, 2007, $22,190,000,
Cosmos Bank, Hua Nan Commercial Bank Ltd. Trust Dept.;
ee. GVECR II Debentures Series 2007 C, September 3, 2007,
$115,840,000, Cosmos Bank, Entie Bank, Hua Nan Commercial Bank Ltd. Trust
Dept. ;
ff. GVECR II Debentures Series 2007 D, November 1, 2007,
$15,550,000, Cosmos Bank, Entie Bank;
gg. GVECR II Debentures Series 2007 E, December 17, 2007,
$56,350,000, Cosmos Bank, Hua Nan Commercial Bank Ltd. Trust Dept.;
hh. GVECR II Debentures Series 2008 B, February 4, 2008,
$45,170,000, Hua Nan Commercial Bank Ltd. Trust Dept.;
11. GVECR II Debentures Series 2008 C, February 4, 2008,
$11,900,000, Cosmos Bank, Hua Nan Commercial Bank Ltd. Trust Dept.;
JJ. GVECR II Debentures Series 2008 AI, March 7, 2008, $6,000,000,
Hua Nan Investment Trust Corporation;
kk. GVECR II Debentures Series 2008 A2, March 7, 2008,
$6,000,000, Hua Nan Investment Trust Corporation;
n. GVECR II Debentures Series 2008 A3, March 7,2008, $6,000,000,
Hua Nan Investment Trust Corporation;
mm. GVECR II Debentures Series 2008 A4, March 7, 2008, $6,000,000,
Hua Nan Investment Trust Corporation;
nn. GVECR II Debentures Series 2008 A5, March 7, 2008, $6,616,225,
Hua Nan Investment Trust Corporation;
00. GVECR II Debentures Series 2008 E, April 30, 2008, $33,341,000,
Entie Bank, Taichung Bank;
pp. GVECR II Debentures Series 2008 G, May 30,2008, $18,860,000,
Entie Bank, Taichung Bank;
COMPLAINT
-7 - Doc. #600752 v.2
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qq. GVECR II Debentures Series 2008 I, July 2, 2008, $14,533,000,
Taichung Bank;
IT. GVECR II Debentures Series 2008 H-6, July 31, 2008,
$12,380,000, Taichung Bank;
ss. GVECR II Debentures Series 2008 H-7, July 31, 2008, $8,500,000,
Coretech; and
tt. GVECR II Debentures Series 2008 J, September 3, 2008,
$15,621,000, Taichung Bank.
19. PEMGroup subsidiaries and affiliates include GVEC Resource, Inc.;
GVEC Resource II, Inc.; GVEC Resource III, Inc.; GVEC Resource IV, Inc.; GVEC
Resource V, Inc.; GVEC Resource VI, Inc.; GVEC Acquisitions, Inc.; Genesis Voyager
Equity II Corporation; Genesis Voyager Assets Management; Genesis Voyager Equity
Corporate Resources I, Inc.; GVEC Investments Corporation; Epoch Investment
Holding Corporation; Fides Insurance Company, Ltd.; Irvine Insurance Company (BVI),
Ltd.; Equity Resource Management (BVI), Ltd.; ERM Resource, Ltd.; Dominical
Holdings, LLC; Jorei Enterprises, LLC; Irvine Capital Holdings, LLC; and Zhongguo
Investments Corporation.
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18 THE OFFERINGS19 20. Since at least 2003 and continuing through September 2008, Pang, the
20 PEMGroup Management Team and the Tranches offered and sold preferred shares,
21 notes and bonds and other forms of debt and purported to use the proceeds to purchase
22 and/or finance the maintenance of, life insurance policies issued to high net worth
23 individuals, and/or to invest in timeshare related assets and potentially other assets.
24 Pang, the PEMGroup Management Team and the Tranches offered and sold securities
25 promising rates of return between 5.25% to 7.55%, paid semi-annually. The offerings
26 for 2003 through July 2005 included preferred shares, while the offerings fromNovember 2005 through September 2008 were exclusively debt offerings including
27notes, bonds and other forms of debt.
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THE FRAUDULENT SCHEME
COMPLAINT
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21. In connection with each of the offerings, on behalf of the Tranches, Pang
and the PEMGroup Management Team prepared and delivered to investors Confidential
Preliminary Private Offering Memoranda ("CPPOMs") and Confidential Private
Offering Memoranda ("CPOMs") that, among other things, represented to investors how
their funds would be used.
22. Between 2004 and 2005, Pang and the PEMGroup Management Team
conducted several offerings to raise money for an Spy called Genesis Voyager Equity
Corporation ("GVEC"), which is a business company incorporated in the British Virgin
Islands. The GVEC offerings were conducted in six Tranches. The funds raised in the
six GVEC offerings were used to purchase life insurance policies. In return for their
investments in the GVEC offerings, investors were promised annual interest payments
of between approximately 6% and 7.1 %, which were payable semiannually, as well as
the return of their principal upon maturity.
23. Between January 2006 and December 2006, Pang and the PEMGroup
Management Team conducted several debt offerings to raise money for an Spy called
GVEC Resource IV Inc. (GVECR IV"). The GVECR IV offerings were conducted in
three Tranches: (1) GVECR IV Notes A; (2) GVECR IV Notes 2006 C; and (3)
GVECR IV Notes 2006 D. The proceeds raised in the GVECR IV debt offerings were
primarily intended for investments in timeshare-related assets and other infrastructure
assets.
24. The GVECR IV A, C and D debt offerings consisted of 48 month notes at
6% interest. Interest was payable semi-annually with principal repayment at the
maturity date. They were described as "asset backed securities." The CPOMs stated
that the net proceeds from the sale of the notes would be used by the issuer to acquire a
portfolio of various infrastructure assets and time share assets and receivables. These
"Underlying Assets" were to be pledged to secure the notes. The issuer was to grant to
the trustee for the benefit of the note holders a first priority security interest in the
Underlying Assets to secure the issuer's obligations under the notes. The CPOMs stated
the noteholders would be provided with annual portfolio reports about the assets and the
COMPLAINT
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receivables purchased from the proceeds of the offering by March 1 of each year. These
CPOMs stated that HSBC as cash custodian would hold the invested capital and assets
acquired with the proceeds of the offerings. The CPOMS on the C and D offerings
further stated that the Underlying Assets would consist of a segregated portfolio of
various infrastructure and time share assets and receivables and that they would be held
in trust.
25. Specifically, in the CPPOMS and/or CPOMs for the GVECR iv Notes A,
GVECR iv Notes 2006 C, and GVECR iv Notes 2006 D offerings, the following
language appears under the "Security for the Notes" section: "The Underlying Assets
consist of 'Asset Backed Securities. ", Later the following language appears under the
"Description of the Underlying Assets" heading:
The net proceeds received by the Issuer from the issuance and thesale of the Notes wil be used to purchase the Underlying Assets, whichinclude without limitation: senior acquisition and development loans;subordinated acquisition and development loans; timeshare receivableloans; management fee receivable loans; and community fee receivableloans.
The assets to which the Issuer wil allocate include the followingcharacteristics:
A term no longer than the term of the Offering (48 months).
****
The asset types under consideration wil include:
1. Secured loans for acquisition and development. Aperformance assurance rated not less than A by A.M. Best oranother rating agency for senior loans may be required.
2. Tranches of timeshare-related securitizations, rated A orbetter.
3. Secured residential bridge mortgages. A performanceassurance rated not less than A oy A.M. Best or anotherrating agency for senior loans may be required.
4. Mortgage loans for acquisition and development. Theseassets require a performance assurance ratea not less thanA by A.M. Best or another rating agency.
5. Preferred return investments in timeshare-related limitedpartnerships, LLCs or other entities with performanceassurances rated not less than A by A.M. Best or another
COMPLAINT
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rating agency.
6. Preferred return investments in timeshare receivables withperformance assurances, rated not less than A by A.M.Best or another rating agency.
Timeshare Industry Description
Vacation ownership is a concept that originated in the FrenchAlps in the 1960's. Now, 40 years later, it is firmly positioned as one ofthe most popular vacation options enjoyed by today's leisure travelers.Consumers are embracing timesharng, maKg it one of the fastest-growing sectors of
the worldwide hospitality industry. In fact, vacationownership has enjoyed a double-digit annual growth rate over the pasttwo decaaes. With vacation ownershil?~ consumers have the opportityto purchase time at quality resorts oftering an array of amenities inpopular international destinations.
There are now more than 5400 resorts in some 100 countriesaround the world and annual vacations ownership sales are estimatedto be in excess of $9.4 bilion. Today 3 milion U.S. households own4.9 milion weeks at nearly 1600 resorts. The average number ofweeks owned per household has increased from 1.5 to 1.8 amongthose who first bought more than 12 years ago. Over 500,000 U.S.timeshare owners would like to buy more time during the next threeyears in a resort area where they already own, and more than 650,000want to buy in another resort area.
The traditional interval week program offers owners the use oftheir accommodations for one week - either for a specific week duringthe year or for a week during a time period or season. During the pastseveral years, consumers have sougfit enhanced flexibility, which hasfueled today's multiple use options. Vacation clubs give membersaccess to resorts within a resort group, under a variety of differentplans. In point-based programs, owners purchase points that can beredeemed for access to various types of accommodations, resortlocations, amenities, number of days use and other travel services.Point-based programs appeal to owners because they provide theflexibility to design their own vacations.
With vacation ownership, consumers make a one-timepurchase of furnished resort accommodations, as a fraction of wholeownership costs, and Fay an annual maintenance fee. Eachcondominium, or unit, 0 a vacation ownership resort is divided intointervals, either by the week or points equivalent, which are soldseparately. The accommodations are priced according to a variety offactors, ,including size of the unit, resort amenities, location, andseason. The purchaser owns the vacation accommodatións, but onlyfor the amount of time he or she plans to use it, typically one or twoweeks each year. With timeshare, the owner has all the benefits of avacation home without the year-round costs. From its origin, the ideabehind timesharing was to give people the abilty to purchase theirfuture vacations - at current prices.
Timeshare programs and their related financing opportnitiesare becoming a strong asset class in investment portfolios. A subset ofthe hospitality and real estate, it has fewer operating risks than hotels,and its returns on equity are driven by sales of fractional or vacationownership interests as opposed to returns on equity driven by
COMPLAINT
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refinancing or total sale of hotel properties on a stabilzed basis.
26. The CPPOMS and CPOMS associated with the GVECR iv Notes A,
GVECR iv Notes 2006 C, and GVECR iv Notes 2006 D offerings were delivered to
Standard Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank in
or around July 2006, November 2006 and December 2006, respectively.
27. Finally, under a section labeled "Assurance and the Assuror," the
following language appears:
"Assurance. Payout of principal of and interest on the Notesmay be assured pursuant to an Assurance (the "Assurance") issued byHannover Re, a bank, a financial institution, or other entity whosegeneral unsecured obligations are rated not less than "A" by A.M.Best Issuer, Inc.; Standard & Poor's, a division of the McGraw-HilCompanies, Inc.; Moody's Investor Service, Inc.; Fitch, Inc. or asimilar rating agency."
A different Assuror was identified for each offering: Hannover Re for Notes A,
HCC Reinsurance, Ltd. for Notes C, and Swiss Re, CIFG or HCC for Notes D.
28. In August 2006, Pang and the PEMGroup Management Team conducted a
debt offering to raise money for an Spy called GVEC II CDO Series 2006. According
to the applicable CPOM, the proceeds from the GVEC II CDO Series 2006 were
primarily intended for, and were represented to investors as, investments in timeshare-
related assets. The language was similar to the language in the GVECR iv offerings. A
different Assuror, Hannover Rueckversicherung, AG, was identified. Bank SinoPac was
the only investor in this offering.
29. In October 2006, Pang and the PEMGroup Management Team conducted
a debt offering to raise money for an Spy called GVEC II Debentures Series 2006-A.
According to the applicable CPOM, the proceeds of the GVEC II Debentures Series
2006-A were primarily intended for, and were represented to investors as, investments
in life insurance related assets. The CPOM represented that the company would acquire
a contestability period insurance policy and a residual value insurance policy to protect
against loss. Bank SinoPac was the only investor in this offering.
26 30. Between December 2006 and September 2008, Pang and the PEMGroup
27 Management Team conducted several debt offerings to raise money for an Spy called
28 GVEC Resource II Inc. ("GVECR II"). The GVECR II offerings were conducted inCOMPLAINT
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approximately 23 Tranches: (1) Series 2006 A-I; (2) Series 2006 A-2; (3) Series 2006
A-3; (4) Series 2006 A-4; (5) Series 2006 A-5; (6) Series 2007 A; (7) Series 2007 B; (8)
Series 2007 C; (9) Series 2007 D; (10) Series 2007 E; (11) Series 2008 AI; (12) Series
2008 A2; (13) Series 2008 A3; (14) Series 2008 A4; (15) Series 2008 A5; (16) Series
2008 B; (17) Series 2008 C; (18) Series 2008 E; (19) Series 2008 G; (20) Series 2008 H-
6; (21) Series 2008 H-7; (22) Series 2008 I; and (23) Series 2008 J.
31. The CPPOMs and CPOMs associated with all of the GVECR II offerings
represented that proceeds would be used primarily to purchase life insurance related
assets plus other assets to assure the stated rates, and were delivered to Hua Nan Bank
and Cosmos Bank, Taichung Bank, Coretech, and Entie, who were the five principal
investors in the GVECR II Spy s. Some of the CPPOMs and CPOMs stated that the
Issuer would purchase contestabilty period insurance and residual value insurance while
others indicated that the portfolio would be secured by an insurance or reinsurance.
32. The GVECR II debt offerings consisted of 30, 36 and 48 month
debentures paying varying rates of interest. Interest was payable quarterly and principal
was payable at maturity. The CPOMs stated that the proceeds of the offering would be
used to purchase term, non-recourse, premium finance loans for the purchase of and
secured by a senior interest in newly issued life insurance policies insuring high net
worth individuals over of the age of 70, plus other assets to assure at the Debenture
Holders return of stated principal plus the stated annual return. The CPOMs stated that
the underlying assets of the debentures would be held by a trustee in segregated
custodial accounts and would consist of a portfolio of non-recourse, premium finance
loans, a 24 month interest reserve and life insurance policies acquired through
satisfaction of the premium finance loans. The CPOMs stated that HSBC would serve
as cash custodian and LaSalle Bank would serve as asset custodian and that the co-
custodians would hold the invested capital and assets acquired with the proceeds of the
offering, the interest reserves and proceeds of the investments.
33. For instance, the following language appears In the CPPOMs and/or
CPOMs for the GVECR II 2007 C, GVECR II 2008 Al and GVECR II 2008 G
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offerings (which were delivered to investors on or around September 3,2007, January 1,
2008 and May 1,2008, respectively) under the "USE OF PROCEEDS" heading:
The Issuer intends to use the Offering proceeds to engage in premiumfinance transactions, with the balance of proceeds used to pay (a) acquisition,servicing trustee, custodian and originatlOn fees, (b) management fees to theManager, advisory fees to the Advisor, and (c) administrative fees andexpenses associated with this Offering.
The Issuer wil use the proceeds from the Offering to acquire assets (the "Assets")consisting of:
. a portfolio of recourse and non-recourse premium finance loans
(the "Loans") for the purchase of, and secured by a senior securityinterest in, newly-issued, non-variable life insurance policies (the"Policies" insuring high-net-worth individuals over the age of 70(the "Seniors');
. beneficial interest in a structured irrevocable life insurance trust (an
"ILIT") that contains Policies;
. Policies acquired by the Issuer as a result of borrowers' Loandefaults, voluntary relinquishment of Policies by borrowers to theIssuer in satisfaction of the Loans or through the secondary market;and
. a twenty-four (24) month interest reserve.
The Issuer intends to acquire adequate Assets within three (3) monthsof the Issuance Date to secure periodic interest payments and repayment ofprincipal to Debenture Holders at the Maturity Date. The Assets underlyingthe Debentues wil be held by a trustee in one or more segregated custodialaccounts with the Issuer as beneficiar. The Issuer intends to commenceliquidation of adequate Assets not less than three (3) months prior to theMaturity Date to ensure payment of all principal and accrued but unpaidinterest at the Maturity Date.
34. In April 2007, Pang and the PEMGroup Management Team conducted a
debt offering to raise money for an Spy called GVECR III Notes - Series 2007 A-4
("GVECR III"). The GVECR III debt offering consisted of 48 month notes at 6%
interest. The interest was payable semi-annually with the principal due upon maturity of
the notes. The notes were described as "asset backed securities." The CPOM stated that
the net proceeds from the sale of the notes would be used by the issuer to acquire a
portfolio of various infrastructure and time share assets and receivables. The
Underlying Asset language was similar to that used in the GVECR IV offerings, as was
the "Assurance and Assuror" language, although different Assurors, Swiss Re,
COMPLAINT
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1 Hannover Re, or HCC Re, were identified. The CPOM stated that the assets of the
2 issuer that would be pledged to secure the notes would be held in a segregated portfolio.
3 It stated that the notes would be secured by the Underlying Assets and that the issuer
4 would grant to the trustee for the benefit of the noteholders a first lien security interest in
5 the Underlying Assets. It stated that the noteholders would be provided with annual
6 portfolio reports of the assets and receivables purchased with the proceeds of the
offering by March 1 of each year. It stated that HSBC as cash custodian would hold the
invested capital and assets acquired with the proceeds of the offering.
MISUSE. DIVERSION AND MISAPPLICATION OF FUNDS
35. As early as July 2006, despite having raised over $75 milion from
Standard Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank
based upon representations that such funds would be loaned or invested in timeshare and
infrastructure assets, Pang and the PEMGroup Management Team could not identify
more than $30 milion in conforming investments, due in part to the fact that PEMGroup
was engaged in a dispute and/or litigation with Shell Vacations, which is the timeshare
company in which the Tranches had previously invested.
36. Because Pang and the PEMGroup Management Team had largely failed to
effectuate the timeshare deals that were described in CPOMs provided to Standard
Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank in
connection with its investments in the GVECR IV Notes A, Notes 2006 C and Notes
2006 D SPY s, the bulk of Standard Chartered Bank Taiwan Ltd. formerly known as
Hsinchu International Bank's $220 milion investment became a "slush fund" from
which Pang and the PEMGroup Management Team misdirected and misappropriated
milions of dollars.
37. Contrary to the explicit language in the CPPOMs and/or CPOMs regarding
use of offering proceeds, starting at least as early as July 2006, Pang and the PEMGroup
Management Team actually used the proceeds of various offerings for a variety of ilicit
and undisclosed purposes, which included but were not limited to: (1) the purchase of
impaired life insurance policies from earlier Tranches; (2) milions of dollars in loans to
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1 PEMGroup to fund the company's exorbitant operating expenses; (3) milions of dollars
2 in unsecured and undocumented personal "loans" to Pang; (4) milions of dollars of
3 excessive compensation, fees, commissions and bonuses to Pang and the PEMGroup
4 Management Team; and (5) hundreds of milions of dollars of loans and investments in
5 high risk nonconforming assets never disclosed in the CPPOMs and CPOMs. None of
6 these uses and/or misappropriations of funds were disclosed to the investors.
THE SPVS AND PEMGROUP ARE LIABLE TO INVESTORS ON7
PROMISSORY NOTES8
38. PEMGroup and the SPVs, GVEC, GVECII, GVECR II GVECR III and9
GVEC iv, which were owned and controlled by PEMGroup affiliates and were10
ultimately controlled by Pang and the PEMGroup Management Team, are liable to the11
various Tranche investors on the $823 milion of remaining promissory notes,
12debentures and bonds they offered and sold.
13 ALLEGATIONS RE EXCESSIVE COMPENSATION AND COMMISSIONS
14 39. Pang and the PEMGroup Management Team looted PEMGroup and the
15 Spy s and their Tranches by paying lavish and excessive compensation, fees, bonuses,
16 and commissions to themselves either directly or by indirectly diverting such funds to
17 themselves. These payments benefited Pang and the PEMGroup Management Team
18 and injured PEMGroup and the Spy s, rendering them unable to pay their debts. From
19 2004 ethrough 2009, the PEMGroup Management Team was paid $107,385,038 in
20 compensation, fees, commissions and bonuses, as follows: Danny Pang, $57,699,740;
21 Bob Anderson $3,568,092, Nasar Aboubakare, $9,459,683; Steven Blair $2,126,004;
22 Todd Gilespie, $7,097,177; Wil Quon, $6,448,329; Peter Paul Mendel, $1,585,519;Anthony Bufinsky, $1,298,049; Sandra Chang, $1,382,134; Andrew Shayne and Eric
Sloane, $2,433,652; Leon Chan, $13,890,642; and Bob Van Duren, $396,016.
40. In addition, the following persons received up front start up Tranche fees
as follows: Danny Pang, $11,733,541; Leon Chan, $12,680,666; and Rick Chen and
James Yen, $1,302,500.
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ALLEGATIONS RE EXCESSIVE CORPORATE EXPENSES
41. Pang and the PEMGroup Management Team looted PEMGroup and the
Spy s and their Tranches by spending lavishly and excessively on corporate expenses,
including multiple lavish office locations, corporate jets, and travel and entertainment.
These payments benefited Pang and the PEMGroup Management Team by enabling
them to project a false veneer of success and profitability, enabling them to raise further
funds from investors, and injured PEMGroup and the SPY s, rendering them unable to
pay their debts. These corporate expense payments exceeded $100 milion.
MISAPPLICATION AND CONVERSION OF ASSETS INTO
NONCONFORMING INVESTMENTS
42. Pang and the PEMGroup Management Team looted PEMGroup and the
SPY s and their Tranches by diverting and misapplying Spy Tranche and PEMGroup
funds into high risk and imprudent loans, equity investments, mezzanine debt, real estate
loans, Chinese coal mines, undeveloped land in Costa Rica, and investment in Chinese
investment funds, in many cases accompanied by payment of fees, bonuses, and
commissions to themselves either directly or by indirectly diverting such funds to
themselves. These loans and investments benefited Pang. and the PEMGroup
Management Team and injuredPEMGroup and the SPY s, rendering them unable to pay
their debts.
43. Many of the loans from the Tranches were placed in lrigh risk hard money
loans, where the borrowers did not qualify for traditional bank financing. The rates on
such loans were higher than traditional bank loans, the term of the loans was short and
the loans funded quickly. Later Pang and the PEMGroup Management Team formed
Jorei Enterprises, Ltd. ("Jorei"), a California based hard money lender, and advanced
moneyfrom the Tranches to Jorei which made hard money loans to borrowers, and Jorei
gave a promissory note to the Tranches.
COMPLAINT
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MANY OF THE NONCONFORMING INVESTMENTS ARE IMPAIRßD.
CAUSING LOSS TO THE SPVS AND PEMGROUP
44. Many of the diverted and misapplied loans, equity investments, mezzanine
debt, real estate loans, coal mines, undeveloped land in Costa Rica, and investment fund
investments are impaired in that their value is substantially lower than the original
investment, rendering PEMGroup and the SPVs unable to pay their debts. Pang and the
PEMGroup Management Team invested over $225 milion into such unauthorized assets
which are substantially impaired. The impaired status of the assets injures PEMGroup
and the SPY s, rendering them unable to pay their debts.
45. As described above, all of the CPOMs for SPY Tranche offerings
described in this Complaint stated that an Assurance or reinsurance or contestability
period insurance policy or residual value insurance policy would be purchased to protect
against loss and assure the return of principal plus the stated annual return. However
Pang and the PEMGroup Management Team purchased a grossly inadequate amount of
such insurance, most of which was placed during the relevant time period with two
captive carriers, Fides Insurance Company, Ltd., and Irvine Insurance Company, Ltd.,
which were responsible for the first 10% of any loss. They did purchase some
reinsurance, but in a grossly inadequate amount, leaving most of the investments
unprotected against loss.
CONSPIRACY AND AIDING AND ABETTING REGARDING
NET ASSET VALUE REPORTS
46. HSBC, Pang and the PEMGroup Management Team entered into a
conspiracy to distribute false and misleading Net Asset Value ("NA V") Reports to
induce investors to maintain their' investments in notes, bonds and other forms of debt
offered by PEMGroup and the Tranches, by lullng them into a false sense of security,
and then to divert and misappropriate those funds for improper and unlawful purposes,
and then to conceal the diversion and misappropriation of the funds.
47. HSBC, Pang and the PEMGroup Management Team acted in concert in
furtherance of this conspiracy by distributing such false and misleading NA V Reports to
COMPLAINT
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investors, directing funds received from the investors to go to Pang and the PEMGroup
Management Team instead of to purchase the promised assets, and directing wires of
investor funds to unauthorized investments.
48. HSBC acted in concert with, knowingly and substantially aided and
abetted; assisted; encouraged; conspired with; authorized, requested, commanded,
ratified or recklessly tolerated the statements and actions of co-conspirators Pang and
the PEMGroup Management Team in order to further the scheme to defraud PEMGroup
and the Tranches; make false representations; omit or misstate material facts;
misrepresent the status of the Tranches; and create send, and fie false and misleading
documents.
KNOWLEDGE OF HSBC
49. HSBC acted as the Cash Custodian for the Tranches and SPY s.
50. HSBC, as Cash Custodian had a duty to hold and maintain the funds and
assets the Tranches and Spy s acquired, pursuant to the terms of the CPPOMs and
CPOMs. The specified uses of the funds, and the details regarding the handling of the
invested capital and assets acquired with the proceeds of the offerings, and the' reports
regarding the assets, varied according to the terms of the CPPOMs and CPOMs as
described above.
51. HSBC as cash custodian was paid at least $1,874,000 in cash custodian
fees to perform its duties.
52. On each SPY Tranche, HSBC signed a letter setting forth the details of the
offering and accepting its duties.
53. The offering proceeds were deposited into Master Accounts at HSBC and
from there were moved into Trustee Accounts at HSBC. The funds were moved from
these accounts into other assets by wire instructions received by HSBC from
PEMGroup, or on Tranche letterhead, or from the trustees. Therefore HSBC had
firsthand knowledge of where the SPY Tranche funds were being expended. Milions of
dollars of such funds were transferred to noncustodial accounts at East West Bank in
Irvine California, to accounts in the names of PEMGroup affiiates such as Jorei and
COMPLAINT
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Zhongguo, to third party accounts of identified corporations and individuals or to title
company escrow accounts relating to real estate loan transactions or to PEMGroup and
its affiiates and PEMGroup Management for fees and commissions. These transfers
circumvented the fundamental purpose of setting up custodial accounts and paying a
cash custodian. HSBC therefore had firsthand information that the SPY Tranche funds
were not being expended to acquire life insurance policies and timeshare investments,
and were not being kept in segregated custodial accounts.
54. In connection with their fraudulent scheme, Pang, the PEMGroup
Management Team and HSBC caused false and misleading Net Asset Value ("NA V")
Reports to be distributed to certain investors. These reports, which were prepared by
HSBC and had the HSBC logo affixed upon them, and were signed by an HSBC
official, purported to represent the net asset value of an investor's investment in the
applicable PEMGroup SPY, and were routinely distributed by Pang and PEMGroup
from PEMGroup's Irvine, California offices., to personnel in PEMGroup's office in
Taipei, Taiwan, and from there to investors.
55. HSBC knew that the NA V reports were fraudulent because all it did was
to verify that it held the applicable promissory note to the investor. HSBC knew that it
had made no effort to locate, identify and value the life insurance assets or the timeshare
assets. HSBC knew that it had made no effort to trace the funds sent to East West Bank,
or to or through PEMGroup and its affiiates, or to locate the funds transferred into
unauthorized loans, equity investments, mezzanine debt, real estate loans, Costa Rica
land, Chinese coal mines or investments in Chinese investment funds and companies, or
to value such assets.
56. The following are the dates and details regarding the NA V reports:
DOCTYPENAV
NAVNAV
NAVNAV
TRANCHE DATE NAV SIGNEDAMOUNT BY
GVEC II CBO Series 8/1 0/06 $36,050,000.00 Not Signed2006 SamDle 1 2 and 3GVECRIVA 10/31/06 $76.1 71.680.00 Not Signed
GVECR CBO Series 2006 11/30/06 $4,580,437.50 Wilbur Quon-PIGVECR IV A 11/30/06 $76 534.760.00 Not Signed
GVECR CBO Series 12/19/06 $4594331.25 Andres SerranoCOMPLAINT
- 20- Doc. #600752 v.2
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2006- F 1
NAV GVECR iv A 12/31/06 $76.922.880.00 Not Signed
NAV GVECR CBO Series 2006 12/31/06 $4,603,106.25 Wilbur Quon-Fl
NAV GVEC II 36 Month Series 12/31/06 $55,456,805.56 Not Signed
2006-ANAV GVEC II 36 Month Series 12/31/06 $55,456,805.56 Not Signed
2006-ANAV GVEC II 36 Month Series 12/31/06 $55,456,805.56 Not Signed
2006-ANAV GVEC II 36 Month Series 12/31/06 $55,456,805.56 Not Signed
2006-ANAV GVEC II 36 Month Series 12/31/06 $55,456,805.56 Not Signed
2006-ANAV GVEC II CDO 48 Month 12/31/06 $32,826,666.67 Not Signed
Series 2006NAV GVEC II CDO 48 Month 12/31/06 $32,~26,666.67 Not Signed
Series 2006NAV GVEC II CDO 48 Month 12/31/06 $32,826,666.67 Not Signed
Series 2006NAV GVEC II CDO 48 Month 12/31/06 $32,826,666.67 Not Signed
Series 2006NAV GVECR CBO Series 2006 1/31/07 $4,625,043.75 Wilbur Quon
-FlNAV GVECR iv A 1/31/07 $77.298.480.00 Wilbur OuonNAV GVECR CBO Series 2006 2/1 0/07 $4,631,625.00 Wilbur Quon
-FlNAV GVECR iv 2006 C 2/28/07 $101.400.675.00 Wilbur QuonNAV GVECR iv A 2/28/07 $75382,920.00 Wilbur QuonNAV GVEC II 36 Month Series 3/31/07 $56,350,655.56 Not Signed
2006-ANAV GVEC II CDO 48 Month 3/31/07 $32,206,666.67 Not Signed
Series 2006NAV GVEC II CDO 48 Month 3/31/07 $32,206,666.67 Not Signed
Series 2006 ,
NAV GVECR iv 2006 C 3/31/07 $101,950,950.00 Wilbur l uonNAV GVECR iv A 3/31/07 $75,796,080.00 Wilbur i uonNAV GVECR iv 2006 C 4/30/07 $102.434.525.00 Wilbur uonNAV GVECR iv A 4/30/07 $76.159.160.00 Wilbur uonNAV GVECR iv 2006 C 5/31/07 $102,951.450.00 Wilbur uonNAV GVECR iv A 5/31/07 $76,547 280.00 Wilbur uonNAV GVECR iv 2006 C 6/7 /07 $103,051,500.00 Wilbur uonNAV GVECR iV A 6/30/07 76910.360.00 Wilbur uonNAV GVECR iv A 7/31/07 77.298.480.00 Wilbur uonNAV GVECR iv A 8/7 /07 77.373.600.00 Wilbur uonNAV GVEC II Series 2006-A 12/31/07 55.456.805.56 Not Signed
NAV GVEC II CDO Series 12/31/07 32,826,666.67 Not Signed
2006NAV GVEC II CDO Series 12/31/07 $32,763,111.11 Not Signed
2006NAV GVECR CBO Series 2006 1/31/08 $4,625,043.75 Nelson Kercado
-FlNAV GVECR iV 2006 C 1/31/08 $100950450 Nelson KercadoNAV GVECR iv 2006 D 1/31/08 $80.399 780 Nelson Kercado
COMPLAINT
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NAV GVECR iv A 1/31/08 $77.298 480 Nelson KercadoNAV GVECR iv A 2/7 /08 $77373.600.00 Nelson KercadoNAV GVECR iv 2006 C 2/29/08 $101.417350.00 Nelson KercadoNAV GVECR iv 2006 D 2/29/08 b80.772.926.67 Nelson KercadoNAV GVECR iv A 2/29/08 75395.440.00 Nelson KercadoNAV GVEC II Series 2006-A 3/31/08 56350.555.56 Not Signed
NAV GVEC II CDO Series 3/31/08 32,138,000.00 Not Signed
2006NAV GVECR CBO Series 2006 3/31/08 $5,074,027.78 Nelson Kercado
- BNAV GVECR iv 2006 C 3/31/08 $101 950.950.00 Nelson KercadoNAV GVECR iv 2006 D 3/31/08 $81 199.380.00 Nelson KercadoNAV GVECR iv A 3/31/08 $75 796.080.00 Nelson KercadoNAV GVECR iv 2006 C 4/30/08 $102434525.00 Nelson KercadoNAV GVECR iv 2006 D 4/30/08 $81 585 853.33 Nelson KercadoNAV GVECR iv A 4/30/08 $76.159.160.00 Nelson KercadoNAV GVECR iv 2006 C 5/31/08 $102.951.450.00 Nelson KercadoNAV GVECR iv 2006 D 5/31/08 $81.998.980.00 Nelson KercadoNAV GVECR iv A 5/31/08 $76.547.280.00 Nelson KercadoNAV GVECR CBO Series 2006 6/30/08 $4,602,375.00 Nelson Kercado
-FlNAV GVEC II Series 2006-A 6/30/08 -l55.446.875.00 Not Signed
NAV GVEC II CDO Series 6/30/08 -l32,504,444.44 Not Signed2006
NAV GVECR CBO Series 2006 6/30/08 $5,154,375.00 Nelson Kercado- B
NAV GVECR iv 2006 C 6/30/08 $100.433.525.00 Nelson KercadoNAV GVECR iv 2006 D 6/30/08 $79.986.653.33 Nelson KercadoNAV GVECR iv A 6/30/08 $76.910.360.00 Nelson KercadoNAV GVECR iv 2006 C 7/31/08 $100.950.450.00 Nelson KercadoNAV GVECR iv A 7/31/08 $77.298.480.00 Nelson KercadoNAV GVECR iv 2006 D 7/31/08 $80.399.780.00 Nelson KercadoNAV GVECR II Series 2008 H- 8/31/08 $8,540,729.17 Nelson Kercado
6NAV GVECR II Series 2008 H- 8/31/08 $12,439,320.83 Nelson Kercado
6NAV GVECR iv 2006 C 8/31/08 $101.450.700.00 Nelson KercadoNAV GVECR iv 2006 D 8/31/08 $80.799.580.00 Nelson KercadoNAV GVECR iv A 8/31/08 $75.420.480.00 Nelson KercadoNAV GVECR CBO Series 2006 9/30/08 $4,536,562.50 Nelson Kercado
-FlNAV GVEC II Series 2006-A 9/30/08 $56.340.625.00 Not Signed
NAV GVEC II CDO Series 9/30/08 $32,116,000.00 Not Signed2006
NAV GVECR II Series 2008 H- 9/30/08 $12,498,641.67 Nelson Kercado6
NAV GVECR II Series 2008 H- 9/30/08 $8,581,458.33 Nelson Kercado7
NAV GVECR II Series 2008 J 9/30/08 $15.685.436.63 Nelson KercadoNAV GVECR iv 2006 C 9/30/08 $101.934.275.00 Nelson KercadoNAV GVECR iv 2006 D 9/30/08 81.186.053.33 Nelson KercadoNAV GVECR iv A 9/30/08 75,783,560.00 Nelson KercadoNAV GVECR II Series 2008 H- 10/31/08 12,557,962.50 Nelson Kercado
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COMPLAINT
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NAV GVECR II Series 2008 H- 10/31/08 $8,622,187.50 Nelson Kercado7
NAV GVECR II Series 2008 J 10/31/08 $15759.419.42 Nelson KercadoNAV GVECR iv 2006 C 10/31/08 $102.451.200.00 Nelson KercadoNAV GVECR iv 2006 D 10/31/08 81.599 180.00 Nelson KercadoNAV GVECR iv A 10/31/08 76.1 71 680.00 Nelson KercadoNAV GVECR II Series 2008 H- 11/30/08 12,586,325.00 Nelson Kercado
6NAV GVECR II Series 2008 H- 11/30/08 $8,662,916.67 Nelson Kercado
7NAV GVECR II Series 2008 J 11/30/08 $15.758,685.42 Nelson KercadoNAV GVECR iv 2006 C 11/30/08 -$102,934,775.00 Nelson KercadoNAV GVECR iv 2006 D 11/30/08 81.985.653.33 Nelson KercadoNAV GVECR iv A 11/30/08 63.238.985.00 Nelson KercadoNAV GVEC II Series 2006-A 12/31/08 55.456,805.56 Not Signed
NAV GVEC II CDO Series 12/31/08 32,286,000.00 Not Signed
2006NAV GVECR CBO 2006 - Fl 12/31/08 $4.603.i 06.25 Nelson KercadoNAV GVECR CBO Series 2006 12/31/08 $5,155,277.78 Nelson Kercado
- BNAV GVECR II Series 2008 H- 12/31/08 $12,625,406.25 Nelson Kercado
6NAV GVECR II Series 2008 H- 12/31/08 $8,703,645.83 Nelson Kercado
7NAV GVECR II Series 2008 J 12/31/08 TI5.830.331.94 Nelson KercadoNAV GVECR iv 2006 C 12/31/08 $100.450.200.00 Nelson KercadoNAV GVECR iv 2006 D 12/31/08 $79,999.980.00 Nelson KercadoNAV GVECR iv A 12/31/08 $63.559.680.00 Nelson KercadoNAV GVECR CBO Series 2006 1/31/09 $4,625,043.75 Nelson Kercado
-FlNAV GVECR II Series 2008 H- 1/31/09 $12,684,487.50 Nelson Kercado
6NAV GVECR II Series 2008 H- 1/31/09 $8,744,376.00 Nelson Kercado
7NAV GVECR II Series 2008 J 1/31/09 -$15901.602.78 Nelson KercadoNAV GVECR iv 2006 C 1/31/09 $100950.450.00 Nelson KercadoNAV GVECR iv 2006 D 1/31/09 80399.780.00 Nelson KercadoNAV GVECR iv A 1/31/09 63.870030.00 Nelson KercadoNAV GVECR II Series 2008 H- 2/28/09 12,739,630.00 Nelson Kercado
6NAV GVECR II Series 2008 H- 2/28/09 $8,782,388.89 Nelson Kercado
7NAV GVECR II Series 2008 J 2/28/09 $15.965.746.53 Nelson KercadoNAV GVECR iv 2006 C 2/28/09 $101.400.675.00 Nelson KercadoNAV GVECR iv 2006 D 2/28/09 80.759.600.00 Nelson KercadoNAV GVECR iv A 2/28/09 60.450.840.00 Nelson KercadoNAV GVECR II Series 2008 J 3/31/09 16.044.144.44 Nelson KercadoNAV GVECR II Series 2008 H- 3/31/09 12,802,650.00 Nelson Kercado
6NAV GVECR iv 2006 C 3/31/09 87,898.940.00 Nelson KercadoNAV GVECR iv A 3/31/09 60.782.160.00 Nelson KercadoNAV GVECR iv 2006 D 3/31/09 76.172.655.00 Nelson KercadoNAV GVECR II Series 2008 H- 3/31/09 $8,825,633.33 Nelson Kercado
7
COMPLAINT
- 23- Doc. #600752 v.2
Case 2:10-cv-03669-GHK -E Document 1 Filed 05/14/10 Page 23 of 54
1 57. The following emails requested NA V reports from HSBC or were sent by
2 HSBC personnel in transmitting the NA V reports, or were sent by PEMGroup personnel
3 enclosing NA V reports signed by HSBC:
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DOC DATE TRANCHE TO FROM CCTYPEE-mail 12/19/06 GVECR CBO Wilbur Quon, Andres
Series 2006 F 1 PEMG Serrano,HSBC
E-mail 12/19/06 GVECR CBO Ann Ru, Wilburn Quon, Chan, L.Series 2006 F 1 PEMG
E-mail 3/28/08 GVECR iV Sheryl Perez, NelsonNotes A PEMGroup Kercado,GVECR iV HSBCNotes CGVECR iVNotes D
E-mail 4/7 /08 GVECR CVO Sheryl Perez, NelsonSeries 2006-B PEMGroup Kercado,
HSBCE-mail 4/7 /08 GVECR 2006- Phoebe Sheryl Perez, Ru,A.
B Chang, ERM PEMGroup Day, V.Resource, Chan, L.Ltd. Quon. W.
E-mail 4/24/08 GVECR iV Phoebe Sheryl Perez, Ru,A.Notes A Chang, ERM PEMGroup Day,V.GVECR iV Resource, Nguyen, H..Notes C Ltd. Quon, W.GVECR iV Leanilo, L.Notes D
E-mail 5/23/08 GVECR iV Phoebe Sheryl Perez, Ru,A.Notes A Chang, ERM PEMGroup Quon, W.GVECR iV Resource, Nguyen, H.Notes C Ltd. Leanilo, L.GVECR iVNotes D
E-mail 6/18/08 GVECR 2006- Sheryl Perez, NelsonB PEMGroup Kercado,
HSBCE-mail 7/2/08 GVECR iV Phoebe Sheryl Perez, Ru,A.
Notes A Chang, ERM PEMGroup Quon, W.GVECR iV Resource, Nguyen, H.Notes C Ltd. Leanilo, L.GVECR iVNotes D
E-mail 7/2/08 GVECR iV Sheryl Perez, Nelson Nguyen, H.Notes A PEMGroup Kercado, Leanilo, L.GVECR iV HSBC Quon, W.Notes CGVECR iVNotes D
COMPLAINT
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E-mail 7/15/08 GVECR CBO Phoebe Perez, S. Quon, W.Series 2006 F 1 Chang, ERM Chan, L.
Resource, Day, V.Ltd. Ru,A.
E-mail 07/21/08 GVECR CBO Sheryl Perez, Nelson Nguyen, H.Series 2006 F 1 PEMGroup Kercado, Leanilo, L.
HSBC Quon, W.E-mail 8/1/08 GVECR iv Sheryl Perez, Nelson
Notes A PEMGroup Kercado,GVECR iv HSBCNotes CGVECR ivNotes D
E-mail 8/1/08 GVECR iv Phoebe Sheryl Perez, Quon, W.Notes A Chang, ERM PEMGroup Nguyen, H.GVECR iv R"esource, Leanilo, L.Notes C Ltd.GVECR ivNotes D
E-mail 9/4/08 GVECR iv Phoebe Sheryl Perez, Nguyen, H.Notes A Chang, ERM PEMGroup Leanilo, L.GVECR iv Resource, Quon, W.Notes C Ltd.GVECR ivNotes DGVECR II 2008H7GVECR II 2008H6
E-mail 10/6/08 GVECR iv Phoebe Sheryl Perez, Quon, W.Notes A Chang, ERM PEMGroup Chan, L.GVECR iv Resource, Day, V.Notes C Ltd. Lin, V.GVECR iv Leanilo, L.Notes D Nguyen, H.GVEC CBOSeries 2006 BGVECR II 2008H7GVECR II 2008H6GVECR II 2008JGVEC CVOSeries 2006 F 1
E-mail 10/31/08 GVECR iv Phoebe Sheryl Perez, Nguyen, H.Notes A Chang, ERM PEMGroup Leanilo, L.GVECR iv Resource, Quon, W.Notes C Ltd.GVECR ivNotes DTaichung 2008H6Coretech 2008H7
COMPLAINT
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Taichung 2008J
E-mail 12/2/08 GVECR iv Sheryl Perez, NelsonNotes A PEMGroup Kercado,GVECR iv HSBCNotes CGVECR ivNotes DTaichung 2008H6Coretech 2008H7Taichung 2008J
E-mail 1/7/09 GVECR iv Sheryl Perez, Nelson Nguyen, H.Notes A PEMGroup Kercado, Leanilo, L.GVECR iv HSBC Quon, W.Notes CGVECR iv
. Notes DTaichung 2008H6Coretech 2008H7Coretech CBO2006- BTaichung 2008JTS Super Fund
E-mail 2/3/09 GVECR iv Sheryl Perez, Nelson Nguyen, H.Notes A PEMGroup Kercado, Leanilo, L.GVECR iv HSBC. Quon, W.Notes CGVECR ivNotes DTaichung 2008H6Coretech 2008H7Taichung 2008JTS Super Fund
E-mail 3/2/09 GVECR iv Sheryl Perez, Nelson Nguyen, H.Notes A PEMGroup Kercado, Leanilo, L.GVECR iv HSBC Quon, W.Notes CGVECR ivNotes DTaichung 2008H6Còretech 2008
COMPLAINT
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H7Taichung 2008J
E-mail 4/3/09 GVECR iv Sheryl Perez, Nelson Nguyen, H.Notes A PEMGroup Kercado, Leanilo, L.GVECR iv HSBC Quon, W ~Notes CGVECR ivNotes DTaichung 2008H6Coretech 2008H7Taichung 2008J
58. In several respects, these NA V Reports were materially false and
misleading. First of all, some of the reports were prepared and distributed by the
PEMGroup Management Team, using HSBC letterhead provided by HSBC. Indeed, on
December 19,2006, a PEMGroup employee sent Pang and PEMGroup's CFO an email,
in which she stated that: "I am aware that recent NA Vs are issued by you NOT HSBC,
why?"
59. Additionally, these supposed NA V Reports were false and misleading as
they merely confirmed the face value (e.g., the amount invested by an investor) of
particular assets, as opposed to the actual NAVas of the date or the report. Typically,
the term "net asset value" denotes the market value of a particular asset, as of a
particular date, minus any liabilties associated with that asset.
60. The false and misleading NA V reports were a significant factor in
concealing the frauds being perpetrated by Danny Pang and The PEMGroup
Management Team from the investors and others. Truthful NA V reports would have
revealed that Tranche and PEMGroup assets w:ere being diverted and misappropriated,
would have revealed that life insurance and timeshare assets were significantly
impaired, and would have revealed that hundreds of milions of Tranche and PEMGroup
funds had been diverted and misapplied into unauthorized assets which were
significantly impaired. Had the frauds been revealed earlier, they would have been
stopped and investigated, preventing milions of dollars of losses.
COMPLAINT
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61. In most instances, the value of the assets held by the Spy shad
significantly declined after the date of the applicable offering. For instance, the entire
market for life insurance assets was severely depressed between 2007 and 2008, and yet
this was not reflected in the NA V Reports issued by Pang and PEMGroup. Also, a
number of the assets held by, and/or contàined in, the SPVs had been misappropriated
by Pang and PEMGroup. However, the resulting diminution in value of the affected
SPVs was not reflected in the NA V Reports.
62. Because many of the Tranche funds had been distributed to or loaned to
Pang and the PEMGroup Management Team, loaned to PEMGroup to pay
compensation or expenses, or diverted into unauthorized assets which were substantially
impaired, the diminution value of the Spy was not reflected in the NA V reports.
63. HSBC made no effort to identify, or locate any Spy assets to value them.
It made no effort to value the life insurance policies. It knew or was recklessly
indifferent to the fact that hundreds of millons of dollars of assets had been diverted
elsewhere but made no effort to trace or value assets acquired with the funds.
IMPROPER LOANS AND THEFTS BY PANG
64. At least as early as July 2007, Pang began to take unsecured and interest-
free personal "loans" from several of the SPVs and other PEMGroup related entities,
which contained proceeds of offerings. The overwhelming majority of these supposed
loans were never repaid to the SPVs or PEMGroup affiliates.
65. For instance, on or around July 26, 2007, Pang caused ERML (a
PEMGroup entity) to loan $1 milion to Nevada Capital Partners ("NCP"), which is an
entity controlled by Pang.
66. Subsequently, on or around August 23, 2007, Pang caused ERML to lend
him $650,000.
67. In 2008 alone, Pang received total compensation from PEMGroup in the
amount of $32.9 milion. Irrespective of the fact that he caused PEMGroup to pay him
huge amounts of money in salary, as well as in questionable bonuses and commissions,
COMPLAINT
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Case 2:10-cv-03669-GHK -E Document 1 Filed 05/14/10 Page 28 of 54
1 Pang supplemented his income by blatantly misappropriating funds from the SPY sand
2 PEMGroup affiliates.
3 68. On or around January 31, 2008, Pang caused GVECR iv Notes 2006 D to
4 lend $2 milion to LSPC, Inc. ("LSPC"), which is an entity entirely controlled by Pang.
5 On January 31, 2008, PEMGroup's Controller sent an email to Pang, PEMGroup's CFO
6 and a representative at East West Bank (which maintained an account for GVERC ivNotes 2006 D that contained investor funds), in which she requested that East West
7Bank, upon approval from Pang, transfer $2 milion from a GVECR iv account to
8LSPC's account.
969. In response to the Controller's email, Pang sent the following reply email
10to the Controller and the East West Bank representative: "Please accept this email as my
11approval. Thanks."
1270. Similarly, on or around April 22, 2008, Pang caused GVECR iv Notes A
13 to loan him $1 milion.
14 71. On or around April 23, 2008, Pang caused GVECR iv Notes A to lend
15 $1.5 milion to Nevada Capital Development Partners ("NCDP"), which is an entity
16 controlled by Pang.
17 72. Also, on or around September 26, 2008, Pang caused GVECR II 2007 C to
18 loan LSPC $2.5 milion.
19 73. On or about November 5, 2008, Pang caused GVECR II 2008 A and
20 GVECR II 2008 G to lend LSPC a total of $2.5 milion.
21 74. In total, Pang caused the SPVs and other PEMGroup entities to "lend" him
22 approximately $11,150,000. As of the fiing of this Complaint, Pang owed the SPVs
23 and PEMGroup $8.3 milion.
24 75. No contemporaneous formal documentation was created at the time of the
25 purported loans from the various SPVs to Pang and/or the various entities he controlled.76. The CPPOMs and CPOMs associated with the affected SPVs (e.g.,
26GVECR iv Notes A, GVECR iv Notes 2006 C, GVECR iv Notes 2006 D, GVECR II
272007 C, GVECR II 2008 A and GVECR II 2008 G) never disclosed to investors the
28COMPLAINT
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material fact that the proceeds of offerings could or would be used to make personal and
unsecured loans to Pang and/or entities controlled by Pang, such as LSPC, NCP and
NDCP.
77. Similarly, investors in the pertinent SPVs were never otherwise informed
that the proceeds of offerings could be used (and had been used) to make personal and
unsecured loans to Pang and/or entities controlled by Pang, such as LSPC, NCP and
NDCP.
78. In a February 9, 2009 memorandum to Pang and the other PEMGroup
partners, PEMGroup's General Counsel acknowledged that the loans made to Pang and
the entities controlled by Pang were "clearly outside the CPOMs and a clear breach of
our contractual and fiduciary obligations owned to investors."
79. In addition to the undisclosed "loans" that Pang caused the SPY s to make
to him, between 2007 and 2008 Pang misappropriated $13 milion from the SPY sand
used it to pay unearned "commissions" to himself and to his associates.
80. Typically, Pang and the PEMGroup Management Team paid themselves
commissions in connection with its acquisition of life insurance policies on behalf of
investors. These "commissions," which were 4% of the face value of the underlying
policy, were supposed to be paid to Pang and PEMGroup after they had acquired the
pertinent life insurance contracts.
81. Starting in late 2007, however, Pang directed the payment of
"commissions" on life insurance policies that PEMGroup had not acquired or purchased.
The money to pay these so-called commissions was "borrowed" from several of the
GVECR II Spy s, including GVECR II 2007 D, GVECR II 2007 E, GVECR II 2008 A,
GVECR II 2008 B, GVECR II 2008 C, GVECR II 2008 G, GVECR II 2008 Hand
GVECR II 2008 i.
82. The deals upon which the improper commissions were based were never
consummated. Nevertheless, as of May 1, 2009, the PEMGroup Management Team
members and PEMGroup executives that received the unearned $13 milion in
commissions associated with the failed deals have not repaid them.
COMPLAINT
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83. Investors in the pertinent GVECR II SPVs were never given the material
information that the proceeds of offerings would be used to pay commissions to
PEMGroup Management Team members or PEMGroup executives for deals that never
happened.
84. Moreover, in March 2007, Pang misappropriated an additional $4 milion
from several Spy s. PEMGroup had accused its former president of embezzling
approximately $4 milion by causing several of the PEMGroup affiiated SPVs to pay
inflated amounts for life insurance policies, and then keeping a percentage of the
inflation for himself.
85. In March 2007, the former president attempted to pay $4 milion back to
the Tranches in settlement of those accusations. However, rather than depositing it into
the accounts of the appropriate SPVs, on March 13, 2007 Pang immediately
misappropriated the $4 milion by depositing the money into an account that he
controlled at East West Bank.
86. The account at East West Bank was in the name of GVEC Resource IV,
Inc. The mailing address for the account was the same address as PEMGroup's Irvine,
California offices: GVEC Resource IV, Inc., c/o Equity Resource Management, Ltd.,
One Park Place Plaza, Suite 550, Irvine, California 92614.
87. This account was created in connection with the formation of the GVECR
IV Spy s. But rather than close the account after the GVECR IV Spy s had been created
and funded, Pang instruCted that it be kept open for his personal and exclusive use.
Indeed, Pang kept a check book for this account in his desk drawer and repeatedly wrote
checks on this account for personal matters.
88. Once the $4 milion was deposited into the GVEC Resource IV account at
East West Bank, which Pang exclusively controlled, Pang proceeded to divide and
distribute these funds amongst PEMGroup's senior management and kept more than $2
milion for himself.
89. For instance, on or around March 13,2007, Pang wrote himself a check in
the amount of $500,000, which was drawn from the GVEC Resource IV account at East
COMPLAINT
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West Bank where the $4 milion that had been returned by the former PEMGroup
president had been deposited.
90. Similarly, on or around March 13,2007, Pang wrote a check for $1 milion
to Nevada Capital Holdings, an entity controlled by Pang, which was drawn from the
GVEC Resource iv account at East West Bank.
91. On or around March 13, 2007, Pang wrote a check for $250,000 to
Sundulas, an entity controlled by a senior PEMGroup employee, which was drawn from
the GVEC Resource iv account at East West Bank.
92. Again, on or around March 13, 2007, Pang wrote a check for $250,000 to
Q2 Resources, an entity controlled by PEMGroup's CFO, which was drawn from the
GVEC Resource iv account at East West Bank.
93. On or around March 17, 2007, Pang wrote himself a check for $600,000,
which was drawn from the GVEC Resource iv account at East West Bank.
94. On or around April 12, 2007, Pang wrote himself a check for $550,000,
which was drawn from the GVEC Resource iv account at East West Bank.
95. On or around May 11, 2007, Pang wrote a $200,000 check for "CASH",
which was drawn from the GVEC Resource iv account at East West Bank where the $4
milion in investor funds that had been returned by the former PEMGroup president had
been deposited.
96. On or around July 7, 2007, Pang wrote himself a check for $600,000,
which was drawn from the GVEC Resource iv account at East West Bank.
IMPROPER LOANS AND DIVERSION OF FUNDS TO PAY PEMGROUP
EXPENSES
97. At least as early as October 2006 and continuing through 2009, Pang and
the PEMGroup Management Team began using Tranche funds to make undisclosed
loans to PEMGroup to fund its lavish operating expenses. PEMGroup expended over
$100 milion in exorbitant expenses in this manner. By October 2006, PEMGroup's
bum rate had become unsustainable as result of the profligate spending that the
company undertook at Pang's direction. Because PEMGroup's expenses were in excess
COMPLAINT
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of even the exorbitant amounts that Pang and PEMGroup took in fees and commissions,
Pang was forced to identify alternate sources of funding to keep pace with PEMGroup's
expenses.
98. At leàst as early as October 2006, Pang decided to use the Tranche funds
that had already been raised, as well as funds that would be raised by PEMGroup in the
future, in order to pay PEMGroup's operating expenses. Specifically, Pang caused the
SPV s to make loans to PEMGroup, which, in turn, used the funds for various operating
expenses of the company, which include but are not limited to: payroll costs, the
opening of a new PEMGroup office in Shanghai, a 2007 Christmas party in China
(which was attended by employees from all PEMGroup offices) and a three-day 2008
Christmas party aboard a Disney cruise ship (which was attended by employees from all
PEMGroup offices).
99. For instance, on or around October 10, 2006, Pang and the PEMGroup
Management Team caused GVECR iv 2006 A to lend PEMGroup $2 milion. Pang
and the PEMGroup Management Team then used this $2 milion to pay the operating
expenses (e.g., rents and salaries) associated with PEMGroup's sales office in Taipei.
100. On or around January 23, 2007, Pang and the PEMGroup Management
Team caused GVECR iv 2006 C to lend PEMGroup $ 1 milion. Pang and the
PEMGroup Management Team then used this $1 milion to pay the operating expenses
(e.g., rents and salaries) associated with PEMGroup's office in Shanghai.
101. On or around June 5, 2007, Pang and the PEMGroup Management Team
caused GVECR iv 2006 D to lend PEMGroup over $4 milion. Pang and the
PEMGroup Management Team then used this $4 milion to pay the various expenses
(e.g., registered capital, rents and salaries) associated with PEMGroup's office in
Shanghai.
102. Additionally, on or around November 26, 2007, Pang caused GVECR iv
2006 C to lend $1.5 milion to PEMGroup. On November 21,2007, PEMGroup's CFO
wrote an email to Pang, which informed him that, "We have only $18k in available limit
on our AMEX and i project a cash need of $ 1 .3M by the end of next week and i haven't
COMPLAINT
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received the Global Exec invoice for the Dubai trip yet." In the email, the CFO asked
Pang whether he had, "Any thoughts on how we are going to service our cash crunch(,)"
and whether Pang could "borrow funds from GVECR IV." On November 21, 2007,
Pang responded to the CFO's email and wrote "(g)o ahead to borrow 5 miL."
103. On or around December 14,2007, Pang caused GVECR IV 2006 C to lend
an additional $1.5 milion to PEMGroup in order to fund the company's operating
expenses, which included, but were not limited to, credit card bils, salaries and a
company trip to China. On December 14, 2007, the Controller for PEMGroup asked in
an e-mail that Pang and PEMGroup's CFO approve an "inter-account transfer of
$1,500,000 from GVECR IV... to PEMG." Approximately thirty minutes after the
Controller's request, Pang responded, "That's fine. Thanks." The Controller then asked
the CFO to approve the transaction as well, which he did.
104. On or around January 1, 2008, Pang caused GVECR IV Notes A to lend
PEMGroup $1 milion, in order to provide a $1 milion dollar retainer to the law firm
Fulbright and Jaworski LLP, which had been hired to perform services wholly unrelated
to the GVECR IV Notes A SPV.
105. On or around January 11,2008, Pang caused GVECR IV Notes A to lend
PEMGroup $200,000 to enable the company to meet its operating expenses, which
included, but were not limited to, company credit card bils and payroll costs.
106. On or around January 22, 2008, Pang caused GVECR IV 2006 C to lend
PEMGroup $500,000, which the company then used to pay its operating expenses,
which included, but were not limited to, credit card bils and payroll costs. On January
22, 2008, PEMGroup's Controller asked that Pang and PEMGroup's CFO approve a
transfer of $500,000 from GVECR IV 2006 C to PEMGroup. Less than an hour later,
Pang responded and said, "Please accept this email as my approval."
107. On or around January 29,2008, Pang caused GVECR iV 2006 C to lend
PEMGroup $300,000, which the company then used to pay its operating expenses,
which included, but were not limited to, credit card bils and payroll costs. On January
29,2008, PEMGroup's Controller requested that Pang approve a $300,000 wire transfer
COMPLAINT
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from GVECR iv 2006 C to PEMGroup. One minute later on January 29, 2008, Pang
sent the Controller the following email response: "approved."
108. On or about July 28, 2008, Pang caused GVECR II 2007 C to loan
PEMGroup $3 milion. On July 28, 2008, PEMGroup's Controller asked in an e-mail
that Pang and PEMGroup's CFO approve a transfer of $3 milion from GVECR II 2007
C to PEMGroup. Within a few minutes, Pang responded via e-mail that the transfer was
"approved. "
109. On November 19, 2008, Pang caused GVECR iv 2006 C to loan
PEMGroup $500,000. On November 19,2008, PEMGroup's Controller informed Pang,
as well as the COO and CFO of PEMGroup, that "(p )ayment of the AMEX is due in full
today and we need to remit at least $100K to Taipei for their November expenses.
Kindly approve PEMG to borrow $500K from GVECR iv 2006 C." Approximately 6
hours later on November 19,2008, Pang sent the following email response: "Approve."
110. On or about November 26,2008, Pang caused GVECR II 2007 C to lend
$1.5 milion to PEMGroup. On November 26, 2008, PEMGroup's Controller informed
Pang and PEMGroup's COO that, "We have some payables due to be paid today
including payroll, payment for Disney Cruise, remittance to Taipei and monthly
expenses." The Controller asked that Pang approve a $1.5 milion loan from GVECR II
2007 C to PEMGroup, and also informed Pang that "...we wil need additional $500K by
the week of December 8th." A few minutes after receipt of the Controller's November
26, 2008" Pang responded and wrote, "Please accept this email as my approval for both
$ 1.5 mil and $500,000 transaction."
111., The CPPOMs and CPOMs associated with the affected SPY s never
disclosed to investors the plainly material information that the proceeds of offerings
could be used to make "loans" to PEMGroup to enable the company to fund its
exorbitant operating expenses.
112. Similarly, investors in the pertinent SPVs were never otherwise informed
of the material information that the proceeds of offerings could be used (and had been
COMPLAINT
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used) to make loans to PEMGroup to fund its exorbitant operating expenses. As of May
1,2009, PEMGroup owes the SPVs approximately $17 milion in outstanding loans.
UNAUTHORIZED LOANS TO PEMGROUP TO FUND THE COMPANY'S
ACQUISITION OF AIRCRAFT
113. In addition to the undisclosed loans to PEMGroup for its operating
expenses, in 2007, Pang and the PEMGroup Management Team caused Tranche funds
to be utilized to make loans to PEMGroup for the purpose of aircraft acquisitions. On
March 14, 2007, Pang and the PEMGroup Management Team caused a $2.1 milion
loan to be made from GVECR IV 2006 C to InterTravel and Services, Inc., an entity
controlled by Pang and PEMGroup.
114. In June 2007, Pang and the PEMGroup Management Team caused an $18
milion loan to be made from GVECR IV 2006 D to InterTravel and Services, Inc.,
which is an entity controlled by Pang and PEMGroup. This $18 milion dollar loan was
used to fund the purchase of a Gulfstream G4 aircraft for PEMGroup. The investor in
GVECR IV 2006 D was never told that the proceeds of the offering could be used (and
had been used) to make loans to PEMGroup for the purpose of purchasing aircraft for
the company.
115. On October 16,2007, Pang and the PEMGroup Management Team caused
an $11 milion loan to be made from GVECR II 2007 C to Inter Travel and Services,
Inc. This $11 milion dollar loan was used to fund the purchase of Lear Jet aircraft for
PEMGroup. The investor in GVEC II 2007 C was never told that the proceeds of the
offering (and had been used) to make loans to PEMGroup for the purchase of aircraft for
the company.
116. In a February 9, 2009 memorandum to Pang, others on the PEMGroup
Management Team and the other PEMGroup partners, PEMGroup's General Counsel
acknowledged that the loans made to PEMGroup were improper:
I am of the opinion that many of the loans to the PEMGROUPcompanies do not fall with the provisions of the CPOMS the basisupon which the funds were provided by the investors and set out the
contractual obligations that the issuers and their agents andsubcontractors, namely our good selves, are subject. As a result if
COMPLAINT
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there is a shortfall with respect to repayment of the Tranches to theinvestors and this shortfall is in any way impacted as a result of suchloans the liabilty for that shortfall wil, I consider, fall upon you as theproprietors. The rationale being not only is there a clear breach ofcontractual obligations, but also a breach of the fiduciary duty owed toinvestors with regard to the management and investment of their funds.
NONCONFORMING INVESTMENTS
117. During 2007 and 2008, Pang and the PEMGroupManagement Team made
the following nonconforming investments from offering proceeds into high risk and
imprudent loans, equity investments, mezzanirie debt, real estate loans, undeveloped
land in Costa Rica, investment into a Chinese company which owns coal mines, and
investment into Chinese investment funds, which were never disclosed to the investors
and are not within the scope of conforming and permissible uses of the offering
proceeds described and set forth in the CPOMs:
a. On January 16,2007, Pang and the PEMGroup Management Team
caused $1,200,000 of funds from the GVEC Resource iv, Inc. 2006 D Tranche to
be loaned through a PEMGroup affiliate to an individual, secured by two 2,500
sq. ft. industrial buildings located in Santa Ana, California.
b. On January 29, 2007, Pang and the PEMGroup Management Team
caused $2,700,000 of GVEC Resource iv, Inc. 2006 D Tranche funds to be
loaned through a PEMGroup affiiate to an entity, secured by 95.7 acres of land
in Lake Elsinore, California. In 2008, the loan was extended and assigned to
J orei Enterprises, LLC.
c. On March 8, 2007, Pang and the PEMGroup Management Team
caused $2,100,000 of funds from the GVEC Resource iv, Inc. 2006 C Tranche to
be loaned to an entity, and secured by a 2,700 sq. ft. front lot zoned commercial
and back lot residential in San Clemente, California.
d. On April 20, 2007, Pang and the PEMGroup Management Team
caused $7,430,000 in funds from the GVEC Resource IV,Inc. 2006 C Tranche to
be loaned an entity to fund the design of a luxury ship with 200 private
residences and 265 suites for cruise passengers.
COMPLAINT
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e. On April 23, 2007, Pang and the PEMGroup Management Team
caused the GVEC Resource iv, Inc. 2006 D Tranche to loan $305,000 of funds
to an individual, and secured by a single family, 2,800 sq. ft. residence in
Riverside, California.
f. On May 15, 2007, Pang and the PEMGroup Management Team
caused the GVEC Resource iv, Inc. 2006 C Tranche to loan $19,109,000 of
funds to an entity, to acquire parcels of land in Arizona, Florida and North
Carolina which were zoned for hotel development.
g. On June 7, 2007, Pang and the PEMGroup Management Team
caused $1,650,000 of funds from the GVEC Resource III, Inc. A-4 Tranche to be
loaned to an individual and secured by an office building built in 1954 located in
Fresno, California.
h. On June 19, 2007, Pang and the PEMGroup Management Team
caused the GVEC Resource III, Inc. A-4 Tranche to invest $2,650,000 in a
partnership interest in a private investment fund which acquired an interest in a
pink sheet company and oil and gas exploration and production services in Russia
and Kazakhstan and also received a Russian Angel note receivable.
1. On July 18, 2007, Pang and the PEMGroup Management Team
caused GVEC Resource III, Inc. A-4 Tranche to invest $3 milion to acquire
common membership interests in a private company which had a clothing line
and a TV reality show for sports.
J. On July 24, 2007, Pang and the PEMGroup Management Team
caused $740,000 of funds from the GVEC Resource III, Inc. A-4 Tranche to be
loaned through a PEMGroup affiiate to an entity, secured by 10.01 acres of land
and a one-story office building and shop building located in Taft, California.
k. On August 14,2007, Pang and the PEMGroup Management Team
caused $6,500.000 of funds from the GVEC Resource iv, Inc. 2006 D Tranche to
be loaned through a PEMGroup affiiate to an entity, and secured by 160 acres of
land located in Nye County, Nevada.
COMPLAINT
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1. On August 22, 2007 and July 8, 2008, Pang and the PEMGroup
Management Team caused the GVEC Resource iv, Inc. 2006 C and GVEC
Resource iv, Inc. 2006 D Tranches to invest $11,800,000 in a company, which
distributes building materials and tools and provides installation services to
businesses and government.
m. On September 7, 2007, Pang and the PEMGroup Management
Team caused $41 milion of funds from the GVEC Resource iv, Inc. 2006 A,
2006 C and 2006 D Tranches to be loaned to PEMGroup affiiate, GVEC
Acquisitions, Inc., which used the loan to acquire shares in Chipa Natural
Investment Holding Company, a Chinese company involved in acquiring,
exploring and developing mining properties in China with a strong focus in coal,
including five coal mines.
n. On November 30, 2007 and August 20, 2008, Pang and the
PEMGroup Management Team caused the GVEC Resource iv, Inc. 2006 D
Tranche to loan $13,346,000 to a public company which designs, manufactures
and markets electronic devices and communications equipment for aerospace
defense, industrial and communications applications.
o. On December 14, 2007, Pang and the PEMGroup Management
Team caused the GVEC Resource II, Inc. 2007 C Tranche to invest $10 milion
in property on which a restaurant and boat slip are located in Newport Beach,
California.
p. On January 3, 2008, Pang and the PEMGroup Management Team
caused the GVEC Resource II, Inc. 2007 C Tranche to loan $4 milion, through a
PEMGroup affiiate to an individual, and secured by a beach front single family
residence in Laguna Beach, California.
q. On February 4, 2008, Pang and the PEMGroup Management Team
caused the GVEC Resource II, Inc. 2007 E Tranche to loan $7,200,000 to an
entity, a public company which was a specialty retailer of footwear and
accessories for young women.
COMPLAINT
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r. On March 11, 12, Pang and the PEMGroup Management Team
caused the GVEC Resource II, Inc. 2008 A Tranche to loan $11,350,000, through
a PEMGroup affiiate, secured by a second Deed of Trust on a 16 story
commercial and office building at 351 California Street in San Francisco,
California.
s. On July 14, 2008, Pang and the PEMGroup Management Team
caused the GVEC Resource II, Inc. 2007 E, 2008B, 20081 and 2007B Tranches
and Fides to provide $35,000,000, to a PEMGroup affiliate, to purchase the
senior Deed of Trust on the 16 story commercial and office building at 351
California Street in San Francisco, California.
1. On April 24, 2008, Pang and the PEMGroup Management Team
caused the GVEC Resource II, Inc. 2007 D Tranche to loan $500,000 to an
entity, a private global technology solutions provider of enterprise business
intellgence.
u. On April 29, 2008, Pang and the PEMGroup Management Team
caused the GVEC Resource II, Inc. 2008 B Tranche to loan $1,800,000, through
a PEMGroup affiiate, to an entity, and secured by property consisting
approximately 11.62 acres of land in Riverside, California.
v. On May 22, 2008, Pang and the PEMGroup Management Team
caused the GVEC Resource II, Inc. 2008 B Tranche to loan $4,200,000, through
a PEMGroup affiliate, to an entity, secured by 66 acres of raw land zoned for
residential located in Redlands, California.
w. On May 21, August 8, September 16, October 10 and October 21,
2008, Pang and the PEMGroup Management Team transferred $17,711,000 of
funds from the aVEC Resource II, Inc. 2008 B, 2008 C and 2008 E, GVEC
Resource II, Inc. 2007 C and GVEC Resource II, Inc. 2007 E Tranches to
Zhongguo Investment Corporation, a PEMGroup affiiate and investment fund
which invested in Chinese investments, including an equity investment in a solar
COMPLAINT
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company, convertible debt investment in an iron or mining company, and wired
money to two other development companies and paid management fees.
x. On August 6 and October 7, 2008, Pang and the PEMGroup
Management Team caused the GVEC Resource II, Inc. 2007 C and 2007 D
Tranches to use $8,713,000 to acquire undeveloped land in Costa Rica consisting
of 955 acres.
y. On August 12,2008, Pang and the PEMGroup Management Team
caused the GVEC Resource II, Inc. 2007 E Tranche to loan $5 milion, through a
PEMGroup affiiate, to an entity, an investment company in Taiwan which
engages in the manufacture and sale of fiberglass yarns.
z. On August 29,2008, Pang and the PEMGroup Management Team
caused the GVEC Resource II, Inc. 2008 A Tranche to loan $4,353,000, through
a PEMGroup affiliate, to a mezzanine lender, secured by membership interests in
the mezzanine lender. The mezzanine lender's loan was secured by unsold tenant
in common interests in the real property which consisted of retail commercial
buildings and a big block building.
aa. On September 26, 2008, Pang and the PEMGroup Management
Team caused the GVEC Resource II, Inc. 2007 E Tranche to invest $2,300,000 in
a partnership interest in a fund that invested in a public bank holding company
that provides financial products and services through offices in California and
Arizona.
1 i 8. The following wire instructions were sent to HSBC and demonstrate its
knowledge regarding the disbursement of the assets in its control:
23INSTRUCTIONS INSTRUCTIONS DATE WIRE AMOUNT BANK TO WIRE
24 To FROM RECEIVE RECIPIENT ORWIRE SPECIFIED
25 PUROSEHSBC Pang, D. 4/20/07 $6,402,000.00 Bank of Oceano
26 Ouon. W. Oklahoma EscrowHSBC Pang 4/20/07 $1,030,000.00 Bank of Oceano
27 Ouon Oklahoma EscrowHSBC Quon, W. 6/11/07 $1,650,000.00 East West Thomas
28 Mendel P. Bank Savile LoanCOMPLAINT
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- RepaymentHSBC Quon, W. 6/11/07 $5,000,000.00 East West Money
MendeL. P. Bank Market FundHSBC Quon, W. 6/18/07 $18,000,000.00 East West Inter Travel
Pang, D. Bank and Services,Inc.
HSBC Quon, W. 6/19/07 $2,650,000.00 East West RussinaPang, D. Bank Angel
Acquisition,LLC
HSBC Quon, W. 7/18/07 $1,000,033.33 Bank of Self MadeMendeL P. America Inc.
HSBC Quon, W. 7/18/07 $1,000,033.33 Bank of SimplyMendeL. P. America Believe, Inc.
HSBC Quon, W. 7/18/07 $1,000,033.33 Union Miracle ManMendel, P. Bank of Entertainment
CaliforniaHSBC Quon, W. 7/18/07 $135,000.00 East West Private
Mendel, P. Bank EquityManagement
GroupHSBC Quon, W. 7/18/07 $365,000.00 Bank of TapouT, LLC
MendeL. P. AmericaHSBC Pang, D. 8120/07 $10,066,666.58 Citibank JFI-HDS,
Ouon. W. LLCHSBC Pang, D. 10/16/07 $11,000,000.00 East West Inter Travel
Quon, W. Bank and Services,Inc.
HSBC Mendel, P. 11/30/07 $1,926,773.53 Wells PasadenaAnderson, R. Fargo Office - Pay
Bank off EmriseHSBC Mendel, P. 11/30/07 $4,073,226.47 Wells Remainder of
Anderson, R. Fargo Term A LoanBali - Emrise
Corp.HSBC Daily, 1. 12/17/07 $10,000,000.00 East West Nevada
Knudson, W. Bank CapitalHoldingsPartnersProperty
i InvestmentHSBC Daily, 1. 2/4/08 $7,200,000.00 Bank of Term Loan
Knudson, W. America BakersRetail Footwear
Finance Group Inc.HSBC Daily, 1. 2/4/08 $300,000.00 East West Closing Fee
Knudson W. BankHSBC Daily, 1. 8/6/08 $2,500,000.00 East West Dominical
Knudson. W. Bank HoldingsHSBC Daily, 1. 8/6/08 $2,500,000.00 East West Dominical
Knudson, W. Bank Holdings -Loan
Agreementdated 8/6/08
HSBC Daily, 1. 8/20/08 $286.660.61 Sun Loan #COMPLAINT
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Knudson, W. National 670600 -Bank Payoff
HSBC Daily, 1. 8/20/08 $31,860.92 Sun RetentionKnudson, W. National Bonuses
BankHSBC Daily, 1. 8/20/08 $5,000,000.00 UBS AG Charles and
Knudson, W. Peggy BrandEmrise
HSBC Daily, 1. 8/20/08 $2,500,000.00 Wachovia Charles andKnudson, W. Bank Peggy Brand
EmriseHSBC Daily, 1. 8/20/08 $2,257,439.21 Oppenhei Charles S.
Knudson, W. mer BrandFunds, EmriseUnited
MissouriBank
HSBC Daily, 1. 8/20/08 $1,219,679.90 Hudson Joanne K.
Knudson, W. City Couse,Savings Thomas P.M.
Bank CouseEmrise
HSBC Daily, 1. 8/20/08 $1,219,679.90 Hudson Michael L.Knudson, W. City Gaffney
Savings EmriseBank
HSBC Daily, 1. 8/20/08 $123,199.99 Wachovia EmriseKnudson. W. Bank
HSBC Daily, 1. 8/20/08 $21,750.00 Wachovia AdditionalKnudson, W. Bank Deposit -
Change in. Control
HSBC Daily, 1. 8/20/08 $339,808.92 East West Advisory FeeKnudson, W. Bank and Legal
FeesHSBC Daily, J. 10/7/08 $4,000,000.00 East West Dominical
Knudson, W. Bank Holdings -additional
draw on loanagreement
dated 8/6/08
PLAINTIFF'S DISCOVERY OF THE DEFENDANTS' TORTIOUS CONDUCT
119. Commencing in 2003 and continuing through April 24, 2009, PEMGroup
and its affiliates were adversely dominated by the PEMGroup Management Team and
the PEMGroup Directors, who were responsible in whole or in part for the injuries to
PEMGroup and its affiliates. Specifically, all of the PEMGroup Directors adversely
dominated PEMGroup and its affiliates throughout their terms as PEMGroup Directors.
COMPLAINT
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No independent, disinterested Director was appointed or participated in the control of
PEMGroup and its affiiates.
120. On April 24, 2009 the United States Securities and Exchange Commission
commenced an action against Danny Pang, PEMG Inc. and PEMG LLC, seeking,
among other relief, the entry of a temporary restraining order and the appointment of a
receiver to take control of the entities and their assets.
121. On April 27, 2009 the Court entered an order appointing Robert Mosier as
temporary receiver and on July 2, 2009 the Court entered an order permanently
appointing Robert Mosier as permanent receiver, vesting him with the authority set forth
in paragraph 4.
122. Later, on July 2 and August 10, 2009 the Court entered supplemental
orders placing additional affiiate entities under the authority of the receivership.
123. Mr. Mosier and a team of accounting, legal and other professionals
immediately began marshalling the assets of PEMGroup and its affiiates, reviewing and
studying the books and records of the entities, relevant transactions, corporate15' expenditures, and sources and uses of funds.
16 124. Prior to this work, Plaintiff could not reasonably have discovered the value
17 or the validity of the claims stated herein.
18 125. As a result of the adverse domination of PEMGroup and its affiliates by
19 the PEMGroup Management Team and the PEMGroup Directors, neither PEMGroup or
20 its affiliates discovered or reasonably could have discovered the facts giving rise to the
21 claims for relief set forth herein during the period of adverse domination, which
22 continued until the appointment of Robert Mosier as an independent receiver.
23 COUNT I -AIDING AND ABETTING BREACH OF FIDUCIARY DUTY
24 126. Plaintiff hereby incorporates by reference the proçeeding paragraphs 1-125
25 as set forth herein.
26 127. As president and a director of PEMG, Inc., Pang controlled and directed
27 the actions and operations ofPEMG, Inc.
28COMPLAINT
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128. As a managing member of PEMG, LLC, Pang controlled and directed the
actions and operations ofPEMG, LLC.
129. As an officer, director and managing member of PEMGroup, Pang owed
PEMGroup, the fiduciary duties of care, honesty, loyalty and full disclosure.
130. The PEMGroup Management Team, as officers and directors of
PEMGroup, also owed PEMGroup the fiduciary duties of care, honesty, loyalty and full
disclosure.
131. Commencing in 2003 and continuing through March 2009, and as set forth
more fully above, Pang and the PEMGroup Management Team breached their duties of
care, honesty, loyalty and full disclosure by:
a. Distributing false and misleading NA V Reports to investors;
b. Improperly making interest payments with offering proceeds to
earlier investors in PEMGroup and the Tranches;
c. Improperly purchasing impaired life insurance policies from earlier
SPY Tranches;
d. Making loans from the Spy Tranches to PEMGroup to fund
PEMGroup's exorbitant operating expenses, including funding the establishment
of lavish office locations, purchasing corporate jets, and funding excessive travel
and entertainment expenses;
e. Making unsecured and undocumented personal loans to Pang;
f. Making unsecured and undocumented loans to entities controlled
by Pang;
g. Misapplying and diverting the SPVs' funds into improper,
unauthorized and imprudent loans and investments not in accordance with the
uses of funds set forth in the CPOMs or the CPPOMs; and
h. Paying Pang and the Management Group excessive and unearned
fees, bonuses, and commissions with the offering proceeds.
132. HSBC knowingly and/or recklessly and substantially aided and abetted;
assisted; encouraged; conspired with; authorized; and/or requested, commanded, ratified
COMPLAINT
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or recklessly tolerated the statements and actions of co-conspirators Pang and the
PEMGroup Management Team by assisting Pang and the PEMGroup Management
Team in issuing false and misleading NA V Reports, improperly wiring funds received
from the investors to Pang and the PEMGroup Management Team, and improperly
directing wire transfers of investor funds into unauthorized investments. These actions
aided and abetted Pang and the PEMGroup Management Team in breaching their
fiduciary duties of care, honesty, loyalty and full disclosure.
133. As a direct and proximate cause of the conduct of HSBC and its co-
conspirators Pang and the PEMGroup Management Team,PEMGroup has sustained
damages in an amount to be proven at trial including those damages described more
fully above.
134. PEMGroup is also entitled to disgorgement of the fees HSBC was paid as
cash custodian.
COUNT II - AIDING AND ABETTING CONVERSION
135. Plaintiff hereby incorporates by reference the proceeding paragraphs 1-134
as set forth herein.
136. As set forth fully above, Pang and the PEMGroup Management Team
solicited investors to invest in PEMGroup and the Tranches for the purpose of
purchasing specific assets, including life insurance and time-share related assets.
137. When PEMGroup received the offering proceeds on behalf of the SPVs
and Tranches, Pang and the PEMGroup Management Team converted the offering
proceeds and failed to use the offering proceeds as promised. More specifically Pang
and the PEMGroup Management Team used a substantial portion of the offering
proceeds to:
a. Make interest payments to earlier investors in PEMGroup and the
SPY Tranches;
b. To purchase impaired life Insurance policies from earlier Spy
Tranches;
COMPLAINT
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c. To make loans to PEMGroup to fund its exorbitant operating
expenses, including funding the establishment of lavish office locations,
purchasing corporate jets, and funding excessive travel and entertainment
expenses;
d. To make unsecured and undocumented personal loans to Pang;
e. To make unsecured and undocumented loans to entities controlled
by Pang;
f. To misapply and divert the offering proceeds into improper,
unauthorized and imprudent loans and investments not in accordance with the
uses of funds set forth in the CPOMs or the CPPOMs ; and
g. To pay themselves excessive and unearned fees, bonuses, and
commissions.
138. By virtue of the forgoing conduct, Pang and the PEMGroup Management
Team have intentionally, unlawfully and wrongfully deprived PEMGroup and the SPY
Tranches it controlled of the funds to purchase the promised assets, thereby seriously
interfering with PEMGroup's and the Spy Tranches' abilty to pay their debts.
139. HSBC knowingly and/or recklessly and substantially aided and abetted;
assisted; encouraged; conspired with; authorized; and/or requested, commanded, ratified
or recklessly tolerated the statements and actions of co-conspirators Pang and the
PEMGroup Management Team by assisting Pang and the PEMGroup Management
Team in issuing false and misleading NA V Reports, improperly wiring funds received
from the investors to Pang and the PEMGroup Management Team, and improperly
directing wire transfers of investor funds into unauthorized investments. These actions
allowed Pang and the PEMGroup Management Team to convert the funds that should
have been used to purchase the promised assets set forth in the CPOMs or the CPPOMs.
140. As a direct and proximate cause of the conduct of HSBC and its co-
conspirators Pang and the Management Group, PEMGroup has sustained damages in an
amount to be proven at trial including those damages described more fully above.
COMPLAINT
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COUNT III - GROSS NEGLIGENCE
141. Plaintiff hereby incorporates by reference the proceeding paragraphs 1 - 140
as set forth herein.
142. HBSC prepared and distributed and allowed Pang and the PEMGroup
Management Team to prepare and distribute false NA V Reports to PEMGroup's
investors using HBSC letterhead.
143. These false and misleading NA V Reports were meant to conceal the
improper and unauthorized diversions of funds.
144. The false and misleading NA V Reports did in fact conceal from the
investors the improper and unauthorized diversions of funds.
145. As described more fully above, these offering proceeds were then looted
and misappropriated by Pang and the PEMGroup Management Team, with the
assistance of HSBC. More specifically, HSBC wire transferred these offering proceeds
to Pang and the PEMGroup Management Team and wire transferred these funds into
unauthorized investments.
146. In preparing and distributing false NA V Reports, allowing Pang to prepare
and distribute false NA V Reports, and in improperly transferring the offering proceeds
to Pang, the PEMGroup Management Team, and to unauthorized investments, HSBC
acted with gross negligence, as evidenced by HSBC's want of even scant care and
extreme departure from the ordinary standard of conduct of an entity in its position.
147. As a direct and proximate result of HSBC's gross negligence, PEMGroup
was damaged in an amount to be proven at trial including those damages described more
fully above.
COUNT IV- CONSTRUCTIVE TRUST
148. Plaintiff hereby incorporates by reference the proceeding paragraphs 1-147
as set forth herein.
149. HSBC received cash custodian and other fees from PEMGroup totaling at
least $1,874,000.
COMPLAINT
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150. As set forth above, HSBC wrongfully obtained those fees by representing
that it would act as cash custodian for the proceeds of the offerings.
151. Instead of fulfilling its duties as cash custodian, HSBC distributed false
and misleading NA V Reports to investors, directed funds received from the investors to
go to Pang and the PEMGroup Management Team instead of purchasing the promised
assets, and directed wires of investor funds to unauthorized investments.
152. Thus, HSBC has wrongfully received and retained cash custodian fees
without performing its duties as cash custodian.
153. By virtue ofHSBC's wrongful conduct, HSBC holds such fees, as well as
all profits of such fees, as constructive trustee for PEMGroup's and its affiiates' benefit
pursuant to CaL. Civ Code § 2224.
154. Plaintiff alleges that the amount exceeds $1,874,000, plus interest thereon
at the rate of 8% per annum or as allowed by law.
155. Plaintiff requests that the Court impose such constructive trust as
necessary to protect and preserve PEMGroup's and its affiliates' rights and interests,
and to return these fees to PEMGroup and its affiiates, the rightful owner of the funds.
JURY TRIAL DEMANDED
156. Pursuant to Fed. R. Civ. P. 38 and Fed. R. Civ. P. 81, Plaintiff Robert P.
Mosier, hereby demands a trial by jury on all issues so triable in this action.
PRAYER FOR RELIEF
WHEREBY PLAINTIFF PRAYS FOR THE FOLLOWING RELIEF:
1. Compensatory damages in an amount to be proven at trial;
2. A constructive trust for the benefit ofPEMGroup to be imposed upon thecash custodian and other fees that HSBC has received from its wrongfulacts;
3. Disgorgement of all cash custodian and other fees paid to HSBC;
4. All costs of the proceedings herein;
5. Pre and post judgment interest; and
COMPLAINT
-49 - Doc. #600752 v.2
Case 2:10-cv-03669-GHK -E Document 1 Filed 05/14/10 Page 49 of 54
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6. Any other relief the court deems appropriate.)~
"')1 ,-
DATED this ~ day of May, 2010.
STEPTOE & JOHNSON LLP
By: 1/1~ rFrancis 1. Bi rke, Jr.Seong Kim
Attorneys for Plaintif
Robert P. Mosier
COMPLAINT
- 50- Doc. #600752 v.2
Case 2:10-cv-03669-GHK -E Document 1 Filed 05/14/10 Page 50 of 54
e eSteptoe & Johnson LLPFrancis 1. Burke, Jr. (SBN 75970)Soong Kim (SBN 166604)2121 Avenue of the Stas, Ste. 2900
Los Angeles, CA 90067-5052Telephone: 310-734-3200
- 1 ' \ r, \l- _" l (' l.,: \l ; .' ".' l ¡ ,.... : : \ i .I ..'~ I\ '¡" ., i' I \:. i . .._"....) i \ : \,~.~ ¡ i
UNITED STATES D~TICT COURTCENTRAL DISTRCT OF CALIFORNIA
ROBERTP. MOSIER, as Receiver for PRIATE CAS~ V 10 36 ÓU,EQUIY MAAGEMNT GROUP, INC. and.. 7 GHK IT:,,lPRl ATE EQUIY MAAGEMNT GROUP LLC l.tr,(\ l" d i:\i \ '( s U b~'i d \Q ri es Q ri ll'(¡ liQ1ëLA(S)
v.
HSBC BAN USA, N.A.
l SUMMONS
DEFENAN(S).
TO: DEFENDAN(S): HSBC BAN USA, NA
A lawsuit has been fied against you.
Within .21 days afer service of ths summons on you (not counting the day you received it), youmust se.rve on the plaintiff an answer to the atached It complaint 0' amended complainto counterclaim 0 cross.claim or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answeror motion must be served on the plaintiffs attorney, Fracis J. Burke, Jr. . whose address isSteptoe & Johnson, LLP, 2121 Avenue of the Stas, -gte. 2800, Los Angeles, CA 90067 . If you fail to do so,
judgment by default will be entered against you for the relief demanded in the complaint. You also must fileyour answer or motion with the cour.
i 4 MAY 20m
a~ U4sOct. C_
Br- ~/UDeput Clerk
(Sal of the Court)
~ )-k--2;Dated:
(Use 60 day if the defendant Is the United Sttes or a United States agency, or Is an offcer or flmployee of the United States. Allowed60 day~ by Rule 12(a)(3)).
CV..lA(12/01) SUMMONS
:J .....
Case 2:10-cv-03669-GHK -E Document 1 Filed 05/14/10 Page 51 of 54
1t.~-- -
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UNITED STATE DISTRCT COURT, CENTR DISTlCT OF CALIFRNCI COVER SHET
I (II) PLANTIF (Chec box if you ar recscillngyOUolf Cl DEFNDANTSRober P. Mosier aSBe Bak USA, NAPriVale Equit Magement Oi11. Inc.Prival Eqit Manap~t Group,LL
(b) Atlomcy (Fin Nam, Addr and Telephone Number. ifyollll ~prn8 Atomoys (If Known)younol. prode _e.)Franci 1. Burk Jr. and Sco KimStepto & Johon,21Z1 Avon!'e ofthc Sia SIc. 2800,L, Aigoles. CA9007-052
JL BASIS OF' JtSDICION (plac an X in ono box only.) II ClIzNSHI OF PRICIAL PARTIE. For DiYUit Ca Only(p1a il X in Ont bole fO! plnti and one for ddendiil.)
o i U,S. Goerent Plaill D 3 Fede Quon (U.s. PTF DEYr/4F'
DRFOoveent No II Par) Ciize ofTh St 01 01 Inoor or Pripal Place 04ofBiijieu in this Stle
02 U.S. Oovenuent Oeendan rJ4 Diverity (Indi~ Ciip Ciizen of Anoter Sfa 02 02 Incoi and Pricial Plac OS tisofParcs in Iloi nl) ofBiili~a bi Another StCIen or Subje of II Fo~ign qointr 03 03 Forign Nation 06 06
IV. ORIGIN (plac M X in one box ony.)
rli Orginel 0 2 Remond from 0 3 Remanded frm 0 4 Reld ii 0 S Traerrd frm aner distrct (speoif): 0 6 Mul.Prcceing S1 Cour Appellat Coii Repened DistclUtgaon
V. REUETED IN COMPLAT: .JVDEMA: l'Yec Cl No (Chek 'Yes' oiyifdemaded in conila)CLS ACfION iid.. F.R-C.P, 23: ,0 Yes irNo 0 MONE DEMADED IN COMPLAIN: $VL 'CAUSE OF ACTON (Clfe ii U.S. Civi St unil which you ar fiin and wr a brefstei of ClI. Do not cite juiidiotnel8f iieu diveit.)
is U.S.C. Sec. 71$7, 1332; aidi ai abtt breh offi du, coiivmon; gr naglîgence
VJ NATUOirSUlT(1ceanXlnoielounl.) ,
o 7 App to DlitrciJudge fmiM.p$ Judge
0210 Lad Condemnllo 220 FORCI08
23 Ront l. &. Ejectoir c: 462 NaIlitino 240 Tom to Lad Applioalino 24S Tort Product Liabilit' 0 013 RabOl. Coi.o 290 An Oter Re Prert Alien Dell..
o 46'S 0I llisnonAòtlon
0400 St Reoronmen i: 110 lmurc0410 Antitsl . i: 120 Mare0430 &n and Ba . 0 130 Miller Aco 4S0 ComißCC 0 140 Negoable IDstt
llcsolc. 0 iso Roovet cio 460 D~itOl Overayt &.CJ 470 Raeteer ùiUOed Enorcmen ofand Comipt IDdgnl
Oranzaon Cl is 1 Medica Act0480 OinserCiI IS2 ReeiofDefaulfeCl 4~0 Calelai TV Slt Lo (El.o 810 Sol~e Sorce Vet)o SSO Secuties/Coesl IJ LS3 Recver ofExchae Ovymnt of0875 Customer CboUenge 12 Vct's Bets
USC 3.$10 0 160 Stldei'SullSo 890 Oter Sllloi Aclor 0 190 Oter Co0891 Agrcil Ac 019S Contra Prl1Q\0892 lmnonc Stiliztion LiabiIAct 0 196 Ftsoi: 893 Enviroental Matli: 894 Ener AI0c Acti: 89S Freedom oflno. Aci0900 A¡l of Fee Det
nallon Uncl EqAceu to IiiÎcc
Cl 950 Coiioiiity ofStle Slatcs
,: ,. . -, .
ill~~~~;~~ ~~:: 1~r!~~ Qt :~r ;~~~:¡;~310 AIlan0315 AIlane Prollot
Llabillyo 320 Aaaull, Libel &.
Slllclcrci 330 Fed. £lploy'
LlabUiIo 340 Ma~o 3" Mi Prl
Liabilityo 350 Moto Vohiolo0355 Molor V.hlol.
Prduct Liabilly
360 Olcr PClOlal
Injui0362 Pmo41 IAur.
Med Ma¡ncto 365 Ponon IAury.
Prot Ljabililo 368 Alboto Peonftl
Inju Pro1Ll.b' .
o 710..Fai LaSfadaOSLO Moton to Act
0370 er nw Vaoai Sentence lJ 720 LarlMgmo;m Tr in Leding: Habea Corpus Relaton~ 380 Oter Poi 0 530 Gene 0 730 LarIgm
Prer Da 0 53S DePenaty Reporg &:o 385 Prpert Da 0 540 MiIl/ DiclosUl Ao
Produc Lift~ Otr 0 740 Ralway Lior ActIl~II .. _ 0 S50 Cill RighlB om Oter Lior
o 422 Apoa2S use 0 SSS Pr Codlon LigaiODIS8 079 EnL.,Ret Inc.042 Witwa28 S . Act,use IS7 0610 Agicul
0620 OtCl Food &441 Voting DrgCl 442 Em10)' 'i: 625 Drg Relatedo 443 HowlnAçe- SeÍ7 of
mmodans Prer 21 use 0 861 IDA (1395f!044, Welf 881 0862 Bla Lung (923)Cl 44S Amrioan with 0 630 Liuor Lawi 0863 PIWCIIW
Disilites . Cl 64 R.R. &: Tnck (40'S(&)Emloy (J 650 Ailine 1lgs 0 S64 ssm 'Ilc XVI
Cl 44 Ammc: with 0 66 occ 0865 RBI 40SDi$iiilillei - Saety /HealthOter 0 690 Oter .
o 44 Ot CivilRighlS
o 870 Tax (U.S. Plaint
atDefendat)o 871 IRS-Th Par 26
use 7609
"''''''''''ONLV,c._ ~ . 3 of; 9AF COMPLETING THE FRONT SIE OF FORM cr.71, COMPLETE THE INFRMTION REUESED BELOW.
CV.71 (OSI08)P/le 1 of2CIV COVER SHT.
Case 2:10-cv-03669-GHK -E Document 1 Filed 05/14/10 Page 52 of 54
UNITED STATES DISTRCT COURT, CENTRL DISTRICT OF CALIFORNIACIVIL COVER SHEET
VIII(a). IDENTICAL CASES: Has this action been previously fied in this court and dismissed, remanded or closed? rlNo DYesIf yes, list case number(s):
VIII(b). RELATED CASES: Have any cases been previously fied in this court that are related to the present case? D No "'YesIf yes, list case number(s): CV09-2901 PSG
Civil cases are deemed related if a previously fied case and the present case:
(Check all boxes that apply) ¡; A, Arise from the same or closely related transactions, happenings, or events; orliE. Cali for determnation of the same or substantially related or similar questions oflaw and fact; or
ri C, For other reasons would entail substantial duplication of labor if heard by different judges; or
D D, Involve the same patent, trademark or copyright, and one of the factors identified above in a, b or c also is present.
IX. VENUE: (When completing the following information, use an additional sheet if necessar,)
(a) List the County in this District; California County outside of this District; State if other than California; or Foreign Country, in which EACH named plaintiff resides,D Check here if the governent, its agencies or emplovees is a named plaintiff, If this box is checked, gO to item (b),
County in this Distrct:. California County outside of this Distrct; State, if other than California; or Foreign Country
ORANGE
(b) List the County in this District; California County outside of this Distrct; State if other than California; or Foreign Country, in which EACH named defendant resides.D Check here if the governent, its agencies or employees is a named defendant. !fthis box is checked, go to item (c),
County in this Distrct:. California County outside of this District; State, if other than California; or Foreign Country
NEW YORK
(c) List the County in this District; California County outside of this Distrct; State if other than California; or Foreign Countr, in which EACH claim arose.Note: In land condenmation cases, use the location of the tract ofland involved.
County in this District:. California County outside of this Distrct; State, if other than California; or Foreign Country
ORANGE
· Los Angeles, Orange, San Bernardino, Riverside, Ventura, Santa Barbara, or San Lui Obispo CountiesNote: In land condemnation cases, use the 10'cation of the tract ofland involved
'7/J~~ ry~"41l/ 'Notice to Counsel/Partes: The CV-71 (JS-44) Civil Cover Sheet and the information contained herein neither replace nor supplement the fiing and service of pleadingsor other papers as required by law, This form, approved by the Judicial Conference of the United States in September 1974, is required pursuant to Local Rule 3- i is not filedbut is used by the Clerk of the Court for the purose of statistics, venue and initiating the civil docket sheet. (For more detailed instructions, see separate instrctions sheet.)
Date l- ?tJ lv, -zc/oX. SIGNATURE OF ATIORNEY (OR PRO PER):
Key to Statistical codes relating to Social Security Cases:
Nature of Suit Code Abbreviation Substative Statement of Cause of Action
861 HIA All claims for health insurance benefits (Medicare) under Title 18, Par A, of the Social Security Act, as amended,Also, include claims by hospitals. skiled nursing facilities, etc., for certifcation as providers of services under theprogram, (42 U,S,C, 1935FF(b))
862 BL All claims for "Black Lung" benefits under Title 4, Par B, of the Federal Coal Mine Health and Safety Act of 1969,
(30 U,S,C, 923)
863 DIWC All claim fied by insured workers for disability insurance benefits under Title 2 of the Social Security Act, asamended; plus all claims fied for child's insurance benefits based on disability. (42 U.S.C. 405(g))
863 DIWW All claims fied for widows or widowers insurance benefits based on disabilty under Title 2 of the Social SecurtyAct, as amended. (42 U,S.C. 405(g))
864 SSlD All claims for supplemental security income payments based upon disability fied under Title 16 of the Social SecurityAct, as amended,
865 RSI All claims for retirement (old age) and surivors benefits under Title 2 of the Social Security Act, as amended. (42U.S.C, (g))
CV-71 (05/08) CIVIL COVER SHEET Page 20f2
Case 2:10-cv-03669-GHK -E Document 1 Filed 05/14/10 Page 53 of 54
UNITED STATES DISTRICT COURTCENTRA DISTRICT OF CALIFORNIA
NOTICE OF ASSIGNMENT TO UNITED STATES MAGISTRATE JUGE FOR DISCOVERY
This case has been assigned to Distrct Judge George King and the assigned discoveryMagistrate Judge is Charles Eick.
The cae number on all documents fied with the Cour should read as follows:
CViO- 3669 GHK (Ex)
Pursuant to General Order 05-07 of the United States Distrct Cour for the Central
District of Cai1fomia, the Magistrate Judge has been designated to hear discovery relatedmotions.
All discovery related motions should be noticed on the calendar of the Magistrate Judge
- - - - - - - - - - - - ~ ~ - - - _.. - - - - - - - - - - - - - - - - - - - -'- -- -- - - - - - --- - ---- - ------ ------ - - - ----_.NOTICE TO COUNSEL
A copy of this notice must be served with the summons and complaint on all defendants (if a removal action isfiled, a copy of this notice must be served on all plaintiffs).
Subsequent documents must be filed at the following location:
(Xl Western Division312 N. Spring St., Rm. G-8Los Angeles, CA 90012
LJ Southern Division LJ411 West Fourth St., Rm.1.053Santa Ana, CA 92701-4516
Eastern Division3470 Twelft St., Rm.134Riverside, CA 92501
Failure to file at the proper location will result in your documents being returned to you.
CV-18 (03/06) NOTICE OF ASSIGNMENT TO UNITED STATES MAGISTRATE JUDGE FOR DISCOVERY
Case 2:10-cv-03669-GHK -E Document 1 Filed 05/14/10 Page 54 of 54