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									                Case 2:10-cv-03669-GHK -E Document 1                                       Filed 05/14/10 Page 1 of 54


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              1 STEPTOE & JOHNSON LLP                                                                                        §~~'\~
               FRACIS J. BUR, JR (SBN 75970)
             2 fburk~~oe.com                                                                                            '. ~ ;:~~i
               SEON KI (SBN~166604)                                                                                     \. ",,, "-fi-i/ _
             3 skim0lsteptoe.com                                                                                          ~-23 .:
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            4 Los Angeles, California. 90067-5052                                                                          fT~")
                   Telephone: (310)' 734-3200                                                                              i-" 0 -( C.
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            5 Facsimile: (310) 734-3300
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            6                                                                                                                  .                            -....,.i

                                                         UNITED STATES DISTRICT COURT'
            7
                                                       CENTRA DISTRICT OF CALIFORNIA

                                       l

                                                                                         . caseNo.:l7CViO 3669 (¡k,
         11

         12
                                                                                         COMPLAINT tl
                                      Plaintiff .                                        jury Trial Demanded
        13
                            VS.
        14
                  HSBC BANK USA, N.A,
        15
                                      Defendant.
        16

        17 Plaintiff Robert P. Mosier alleges as follows:
        18 INTRODUCTION
       19                   1.       Plaintiff       Robert P. Mosier is a citizen of           Cali   fomi   a and receiver for Private
       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                                                       business
                 in California (collectively ~~PEMGroup") and their subsidiares and affiliates.
       23
                           2. Defendat HSBC Ban USA, N.A. is a national association whose
       24
                pricipal offce is in New York. HSBC acted as the Cash Custodian for PEMGroup's
       25
                ' affliates' proceeds of offerings.
       26
                          3. Dany Pang (deceased) was the president and a director of PEMG, Inc.
       27
                Pang was also a managig member ofPEMG, LLC.
       28
                                                                             COMPLAI
                                                                                                                                         Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1          Filed 05/14/10 Page 2 of 54




 1          4. Danny Pang, the PEMGroup Management Team (described below) and

 2   the PEMGroup Directors (described below) (collectively, "the PEMGroup Management

 3   Team") established so-called "special purpose vehicle" ("SPV") entities in the British

 4   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
 5
     were managed and controlled by Pang and the PEMGroup Management Team. They
 6
     raised $951 milion through a series of offerings, of which $823 milion remains
 7
     outstanding.
 8
            5. Commencing at least as early as July 2006, and continuing through at least
 9
     April 2009, Danny Pang and the PEMGroup Management Team formed and entered
10
     into an unlawful conspiracy and agreement to loot PEMGroup and its affiiates by using
11
     the proceeds of various offerings for a variety of ilicit and undisclosed purposes, which
12
     included but were not limited to: (1) the purchase of impaired life insurance policies
13
     from earlier Tranches; (2) milions of dollars in loans and excessive fees and
14   commission to PEMGroup to fund the company's exorbitant operating expenses, which
15   exceeded $100 milion; (3) milions of dollars in unsecured and undocumented personal
16   "loans" to Pang; (4) over $107 milion of excessive compensation, fees, commissions

17   and bonuses to Pang and the PEMGroup Management Team; and (5) hundreds of
18   milions of dollars of loans and investments in high risk nonconforming assets never

19   disclosed in the offering documents, most of which became substantially impaired.
20   None of these uses and/or misappropriations of funds were disclosed to the investors.

21   This looting activity injured PEMGroup and the SPVs, rendering them unable to pay

22   their debts.
            6. As a further purpose of the conspiracy, Pang and the PEMGroup
23
     Management Team, joined by HSBC, conspired and agreed to distribute false and
24
     misleading Net Asset Value ("NA V") Reports to induce investors to maintain their
25
     investments in the notes, bonds and other forms of debt offered by PEMGroup and the
26
     Tranches, by lullng them into a false sense of security, and then to divert and
27
28
                                            COMPLAINT
                                                - 2-                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1            Filed 05/14/10 Page 3 of 54




 1   misappropriate those funds for improper and unlawful purposes, and then to conceal the
 2   diversion and misappropriation of the funds.

 3              7. HSBC acted in concert with, knowingly and substantially aided and

 4   abetted; assisted; encouraged; conspired with; authorized, requested, commanded,
     ratified or recklessly tolerated the statements and actions of co-conspirators Pang and
 5
     the PEMGroup Management Team by creating, and sending, false and misleading
 6
     documents, omitting and misstating material facts; and misrepresenting the status and
 7
     valuation of the assets of the Tranches. Overt acts in furtherance of the conspiracy are
 8
     alleged through this Complaint and continued through at least April 24, 2009.
 9
                                   JURISDICTION AND VENUE
10
                8. This Court has jurisdiction over this action pursuant to 28 D.S.C. §§ 1332,
11
     1348 because the amount in controversy exceeds $75,000 and there is complete
12
     diversity of citizenship. Plaintiff Robert P. Mosier also has jurisdiction in this District
13
     pursuant to D.S.C. § 754, which vests him "with complete jurisdiction and control of
14   all" property located in this District.
15              9. Venue is proper in this district pursuant to 28 D.S.C. § 1391 because
16   certain of the transactions, acts, practices and causes of conduct occurred within this
17   District and the Plaintiff Robert P. Mosier was appointed receiver in this district.
18                                    RECEIVER STANDING
19              10. Robert P. Mosier has standing to bring this action pursuant to 28 D.S.C. §

20   754, which provides: "A receiver appointed in any civil action or proceeding involving

21   propert, real, personal or mixed, situated in different districts shall, upon giving bond

22   as required by the court, be vested with complete jurisdiction and control of all such

23
     property with the right to take possession thereof. He shall have capacity to sue in any
     district   without ancilary appointment."
24
                                               PARTIES
25
                11. Robert P. Mosier was appointed as permanent receiver ofPEMG, Inc. and
26
     PEMG, LLC, and their subsidiaries and affiiates, with full powers of an equity receiver,
27
     including, but not limited to, full power over all funds, assets, collateral, premises
28
                                               COMPLAINT
                                                  - 3-                                Doc, #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1              Filed 05/14/10 Page 4 of 54




 1   (whether owned, leased, occupied, or otherwise controlled), choses in action, books,
 2   records, papers and other real or personal propert, including notes, deeds of trust and


 3   other interests in real property, belonging to, being managed by, or in the possession of

 4   or control of PEMGroup, and their subsidiaries and affiliates.
                 12. Defendant HSBC Bank USA, N .A. ("HSBC") is a national association
 5
     with its principal office in New York. HSBC has over 470 bank branches throughout
 6
     the United States and is a member of the FDIC. HSBC provides commercial banking
 7
     services to its customers.
 8
                 13. PEMG, Inc. offered and sold securities issued by various entities and
 9
     affiiates it controlled. PEMG, Inc. is a Nevada corporation located in Irvine, California.
10
     Danny Pang ("Pang"), as its president and a director, controlled and directed the actions
11
     and operations of this entity. PEMG, Inc purported to invest in life insurance policies
12
     and interest in timeshare-related assets.
13
                 14. PEMG, LLC is a Nevada limited liability company located in Irvine,
14   California. Pang, as a managing member, controlled and directed the actions and
15   operations of     this entity. PEMG, LLC took equity positions in certain investments made
16   by PEMG, Inc.
17                                        OTHER PERSONS
18               15. Danny Pang (deceased) resided in Newport Beach, California. Danny
19   Pang had effective control of and access to at least some of the bank accounts into which
20   investor funds were placed. Pang also controlled and directed the actions of Life

21   Settlement Partners, Inc., Life Settlement Partners Corporation and Nevada Capital

22   Holdings, Inc.
                 16. The PEMGroup Management Team consisted of panny Pang (Director,
23
     Chairman, CEO), Leon Chan (Director, Co-President), Robert Anderson (Director, Co-
24
     President), Nasar Aboubakare (Director, Former Vice President), Steven Blair (General
25
     Counsel), Todd Gilespie (Managing Director), Wilbur Quon (Director, CFO), Peter
26
     Paul Mendel (Director, Chief Compliance Officer, Former General Counsel), Anthony
27
     Bufinsky (Managing Director), Sandra Chang (Managing Director), Andrew Shayne
28
                                                 COMPLAINT
                                                    - 4-                             DOC. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1   Filed 05/14/10 Page 5 of 54




 5

 6

 7

 8

 9

10

11

12

13




                                     COMPLAINT
                                        - 5-                              DoC. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1         Filed 05/14/10 Page 6 of 54




 1                   1. GVECR Dl Notes, November 15,2005, $1,000,000, lIT;
 2                   m. GVECR D2 Notes, November 15,2005, $1,493,800, lIT;

 3                   n. GVECR El Notes, November 15,2005, $2,500,000, lIT;

 4                   o. GVECR E2 Notes, November 15,2005, $2,472,500, lIT;
                     p. GVECR B Notes, January 2,2006, $5,000,000, Coretech;
 5

 6
                     a. GVECR PI Notes, March 21, 2006, $4,500,000, Truswell
          Securities Investment Trust;
 7
                     r. GVECR IV Notes A, July 26, 2006, $75,120,000, Standard
 8
          Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank;
 9
                     s. GVEC II CDO Series 2006, August 1, 2006, $32,000,000, Bank
10
          SinoPac;
11
                     t. GVEC II Debentures Series 2006-A, October 10, 2006,
12
          $55,000,000, Bank SinoPac;
13
                     u. GVECR IV Notes C, December 7, 2006, $100,050,000, Standard
14        Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank;
15                   v. GVECR IV Notes D, December 28, 2006, $79,960,000, Standard
16        Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank;
17                   w. GVECR II Debentures Series 2006-A-l, January 1, 2007,
18        $5,000,000, Hua Nan Investment Trust Corporation;
19                   x. GVECR II Debentures Series 2006-A-2, January 1, 2007,
20        $5,000,000, Hua Nan Investment Trust Corporation;

21                   y. GVECR II Debentures Series 2006-A-3, January 1, 2007,
22        $5,000,000, Hua Nan Investment Trust Corporation;

23
                     z. GVECR II Debentures Series 2006-A-4, January 1, 2007,
          $5,000,000, Hua Nan Investment Trust Corporation;
24
                      aa. GVECR II Debentures Series 2006-A-5, January 1, 2007,
25
          $2,460,000, Hua Nan     Investment Trust Corporation;
26
                     bb. GVECR III Notes - Series 2007 A-4, April 2, 2007, $16,870,000,
27
          Cosmos Bank, Entie Bank;
28
                                           COMPLAINT
                                               - 6-                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                           Filed 05/14/10 Page 7 of 54




 1                  cc. GVECR II Debentures Series 2007 A, May 9, 2007, $12,560,000,
 2        Hua Nan Commercial Bank Ltd. Trust Dept.;

 3                  dd. GVECR II Debentures Series 2007 B, July 2, 2007, $22,190,000,

 4        Cosmos Bank, Hua Nan Commercial Bank Ltd. Trust Dept.;

 5
                    ee. GVECR II Debentures Series 2007 C, September 3, 2007,
          $115,840,000, Cosmos Bank, Entie Bank, Hua Nan Commercial Bank Ltd. Trust
 6
          Dept. ;
 7
                    ff. GVECR II Debentures Series 2007 D, November 1, 2007,
 8
          $15,550,000, Cosmos Bank, Entie Bank;
 9
                    gg. GVECR II Debentures Series 2007 E, December 17, 2007,
10
          $56,350,000, Cosmos Bank, Hua Nan Commercial Bank Ltd. Trust Dept.;
11
                    hh. GVECR II Debentures Series 2008 B, February 4, 2008,
12
          $45,170,000, Hua Nan Commercial Bank Ltd. Trust Dept.;
13
                    11. GVECR II Debentures Series 2008 C, February 4, 2008,
14        $11,900,000, Cosmos Bank, Hua Nan Commercial Bank Ltd. Trust Dept.;
15                                                                               March 7, 2008, $6,000,000,
                    JJ. GVECR II Debentures Series 2008 AI,


16        Hua Nan Investment Trust Corporation;
17                  kk. GVECR II Debentures Series 2008 A2, March 7, 2008,
18        $6,000,000, Hua Nan Investment Trust Corporation;
19                  n. GVECR II Debentures Series 2008 A3, March 7,2008, $6,000,000,

20        Hua Nan Investment Trust Corporation;

21                  mm. GVECR II Debentures Series 2008 A4, March 7, 2008, $6,000,000,

22        Hua Nan Investment Trust Corporation;

23
                    nn. GVECR II Debentures Series 2008 A5, March 7, 2008, $6,616,225,
          Hua Nan Investment Trust Corporation;
24
                    00. GVECR II Debentures Series 2008 E, April 30, 2008, $33,341,000,
25
          Entie Bank, Taichung Bank;
26
                    pp. GVECR II Debentures Series 2008 G, May 30,2008, $18,860,000,
27
          Entie Bank, Taichung Bank;
28
                                                              COMPLAINT
                                                                 -7 -                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                Filed 05/14/10 Page 8 of 54




 1                          qq. GVECR II Debentures Series 2008 I, July 2, 2008, $14,533,000,
 2              Taichung Bank;

 3                          IT. GVECR II Debentures Series 2008 H-6, July 31, 2008,
 4              $12,380,000, Taichung Bank;
                            ss. GVECR II Debentures Series 2008 H-7, July 31, 2008, $8,500,000,
 5
                Coretech; and
 6
                            tt. GVECR II Debentures Series 2008 J, September 3, 2008,
 7
                $15,621,000, Taichung Bank.
 8
                 19. PEMGroup subsidiaries and affiliates include GVEC Resource, Inc.;
 9
     GVEC Resource II, Inc.; GVEC Resource III, Inc.; GVEC Resource IV, Inc.; GVEC
10
     Resource V, Inc.; GVEC Resource VI, Inc.; GVEC Acquisitions, Inc.; Genesis Voyager
11
     Equity II Corporation; Genesis Voyager Assets Management; Genesis Voyager Equity
12
     Corporate Resources I, Inc.; GVEC Investments Corporation; Epoch Investment
13
     Holding Corporation; Fides Insurance Company, Ltd.; Irvine Insurance Company (BVI),
14   Ltd.; Equity Resource Management     (BVI), Ltd.; ERM Resource, Ltd.; Dominical
15   Holdings, LLC; Jorei Enterprises, LLC; Irvine Capital Holdings, LLC; and Zhongguo
16   Investments Corporation.
17                                      THE FRAUDULENT SCHEME
18 THE OFFERINGS
19 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 from
     November 2005 through September 2008 were exclusively debt offerings including
27
     notes, bonds and other forms of debt.
28
                                                  COMPLAINT
                                                      - 8-                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                   Filed 05/14/10 Page 9 of 54




 1              21. In connection with each of the offerings, on behalf of the Tranches, Pang

 2   and the PEMGroup Management Team prepared and delivered to investors Confidential

 3   Preliminary Private Offering Memoranda ("CPPOMs") and Confidential Private

 4   Offering Memoranda ("CPOMs") that, among other things, represented to investors how
     their funds would be used.
 5
                 22. Between 2004 and 2005, Pang and the PEMGroup Management Team
 6
     conducted several offerings to raise money for an Spy called Genesis Voyager Equity
 7
     Corporation ("GVEC"), which is a business company incorporated in the British Virgin
 8
     Islands. The GVEC offerings were conducted in six Tranches. The funds raised in the
 9
     six GVEC offerings were used to purchase life insurance policies. In return for their
10
     investments in the GVEC offerings, investors were promised annual interest payments
11
     of between approximately 6% and 7.1 %, which were payable semiannually, as well as
12
     the return of    their   principal upon maturity.
13
                 23. Between January 2006 and December 2006, Pang and the PEMGroup
14   Management Team conducted several debt offerings to raise money for an Spy called
15   GVEC Resource IV Inc. (GVECR IV"). The GVECR IV offerings were conducted in
16   three Tranches: (1) GVECR IV Notes A; (2) GVECR IV Notes 2006 C; and (3)
17   GVECR IV Notes 2006 D. The proceeds raised in the GVECR IV debt offerings were
18   primarily intended for investments in timeshare-related assets and other infrastructure
19   assets.

20               24. The GVECR IV A, C and D debt offerings consisted of 48 month notes at
21   6% interest. Interest was payable semi-annually with principal repayment at the

22   maturity date. They were described as "asset backed securities." The CPOMs stated

23
     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
24
     "Underlying Assets" were to be pledged to secure the notes. The issuer was to grant to
25
     the trustee for the benefit of the note holders a first priority security interest in the
26
     Underlying Assets to secure the issuer's obligations under the notes. The CPOMs stated
27
     the noteholders would be provided with annual portfolio reports about the assets and the
28
                                                   COMPLAINT
                                                         - 9-                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                       Filed 05/14/10 Page 10 of 54




 1   receivables purchased from the proceeds of the offering by March 1 of each year. These
 2   CPOMs stated that HSBC as cash custodian would hold the invested capital and assets

 3   acquired with the proceeds of the offerings. The CPOMS on the C and D offerings

 4   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
 5
     in trust.
 6
             25. Specifically, in the CPPOMS and/or CPOMs for the GVECR iv Notes A,
 7
     GVECR iv Notes 2006 C, and GVECR iv Notes 2006 D offerings, the following
 8
     language appears under the "Security for the Notes" section: "The Underlying Assets
 9
     consist of 'Asset Backed Securities. ", Later the following language appears under the
10
     "Description of the Underlying Assets" heading:
11
                    The net proceeds received by the Issuer from the issuance and the
12           sale of the Notes wil be used to purchase the Underlying Assets, which
             include without limitation: senior acquisition and development loans;
13           subordinated acquisition and development loans; timeshare receivable
             loans; management fee receivable loans; and community fee receivable
14           loans.

15               The assets to which the Issuer wil allocate include the following
                                          characteristics:
16
                      A term no longer than the term of              the Offering (48 months).
17
                                                            ****
18
                      The asset types under consideration wil include:
19
                      1. Secured loans for acquisition and development. A
20                          performance assurance rated not less than A by A.M. Best or
                            another rating agency for senior loans may be required.
21
                      2. Tranches of timeshare-related securitizations, rated A or
22                        better.
23                    3. Secured residential bridge mortgages. A performance
                            assurance rated not less than A oy A.M. Best or another
24                          rating agency for senior loans may be required.
25                    4. Mortgage loans for acquisition and development. These
                         assets require a performance assurance ratea not less than
26                          A by A.M. Best or another rating agency.
                      5. Preferred return investments in timeshare-related limited
27                          partnerships, LLCs or other entities with performance
28
                            assurances rated not less than A by A.M. Best or another
                                                          COMPLAINT
                                                             - 10-                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1               Filed 05/14/10 Page 11 of 54



                            rating agency.
 1
                      6. Preferred return investments in timeshare receivables with
2                           performance assurances, rated not less than A by A.M.
                            Best or another rating agency.
3
           Timeshare Industry Description
4                 Vacation ownership is a concept that originated in the French
           Alps in the 1960's. Now, 40 years later, it is firmly positioned as one of
 5         the most popular vacation options enjoyed by today's leisure travelers.
           Consumers are embracing timesharng, maKg it one of the fastest-
 6                          the worldwide hospitality industry. In fact, vacation
           growing sectors of
           ownership has enjoyed a double-digit annual growth rate over the past
 7         two decaaes. With vacation ownershil?~ consumers have the opportity
           to purchase time at quality resorts oftering an array of amenities in
 8         popular international destinations.
 9                     There are now more than 5400 resorts in some 100 countries
           around the world and annual vacations ownership sales are estimated
10         to be in excess of $9.4 bilion. Today 3 milion U.S. households own
           4.9 milion weeks at nearly 1600 resorts. The average number of
11         weeks owned per household has increased from 1.5 to 1.8 among
           those who first bought more than 12 years ago. Over 500,000 U.S.
12         timeshare owners would like to buy more time during the next three
           years in a resort area where they already own, and more than 650,000
           want to buy in another resort area.
13
                   The traditional interval week program offers owners the use of
14         their accommodations for one week - either for a specific week during
           the year or for a week during a time period or season. During the past
15         several years, consumers have sougfit enhanced flexibility, which has
           fueled today's multiple use options. Vacation clubs give members
16         access to resorts within a resort group, under a variety of different
           plans. In point-based programs, owners purchase points that can be
17         redeemed for access to various types of accommodations, resort
           locations, amenities, number of days use and other travel services.
18         Point-based programs appeal to owners because they provide the
           flexibility to design their own vacations.
19
                       With vacation ownership, consumers make a one-time
20         purchase of furnished resort accommodations, as a fraction of whole
           ownership costs, and Fay an annual maintenance fee. Each
21
           condominium, or unit, 0 a vacation ownership resort is divided into
           intervals, either by the week or points equivalent, which are sold
           separately. The accommodations are priced according to a variety of
22         factors, ,including size of the unit, resort amenities, location, and
           season. The purchaser owns the vacation accommodatións, but only
23         for the amount of time he or she plans to use it, typically one or two
           weeks each year. With timeshare, the owner has all the benefits of a
24         vacation home without the year-round costs. From its origin, the idea
           behind timesharing was to give people the abilty to purchase their
25         future vacations - at current prices.
26                Timeshare programs and their related financing opportnities
           are becoming a strong asset class in investment portfolios. A subset of
27         the hospitality and real estate, it has fewer operating risks than hotels,
           and its returns on equity are driven by sales of fractional or vacation
28         ownership interests as opposed to returns on equity driven by
                                                  COMPLAINT
                                                     - 11 -                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1            Filed 05/14/10 Page 12 of 54



            refinancing or total sale of hotel properties on a stabilzed basis.
 1
            26. The CPPOMS and CPOMS associated with the GVECR iv Notes A,
 2
     GVECR iv Notes 2006 C, and GVECR iv Notes 2006 D offerings were delivered to
 3
     Standard Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank in
 4   or around July 2006, November 2006 and December 2006, respectively.
 5          27. Finally, under a section labeled "Assurance and the Assuror," the
 6   following language appears:
 7                "Assurance. Payout of principal of and interest on the Notes
            may be assured pursuant to an Assurance (the "Assurance") issued by
 8          Hannover Re, a bank, a financial institution, or other entity whose
            general unsecured obligations are rated not less than "A" by A.M.
 9          Best Issuer, Inc.; Standard & Poor's, a division of the McGraw-Hil
            Companies, Inc.; Moody's Investor Service, Inc.; Fitch, Inc. or a
10          similar rating agency."
11          A different Assuror was identified for each offering: Hannover Re for Notes A,

12   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
13
     debt offering to raise money for an Spy called GVEC II CDO Series 2006. According
14
     to the applicable CPOM, the proceeds from the GVEC II CDO Series 2006 were
15
     primarily intended for, and were represented to investors as, investments in timeshare-
16
     related assets. The language was similar to the language in the GVECR iv offerings. A
17
     different Assuror, Hannover Rueckversicherung, AG, was identified. Bank SinoPac was
18
     the only investor in this offering.
19
            29. In October 2006, Pang and the PEMGroup Management Team conducted
20
     a debt offering to raise money for an Spy called GVEC II Debentures Series 2006-A.
21
     According to the applicable CPOM, the proceeds of the GVEC II Debentures Series
22   2006-A were primarily intended for, and were represented to investors as, investments
23   in life insurance related assets. The CPOM represented that the company would acquire
24   a contestability period insurance policy and a residual value insurance policy to protect
25   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 in
                                              COMPLAINT
                                                  - 12-                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1          Filed 05/14/10 Page 13 of 54




 1   approximately 23 Tranches: (1) Series 2006 A-I; (2) Series 2006 A-2; (3) Series 2006
 2   A-3; (4) Series 2006 A-4; (5) Series 2006 A-5; (6) Series 2007 A; (7) Series 2007 B; (8)

 3   Series 2007 C; (9) Series 2007 D; (10) Series 2007 E; (11) Series 2008 AI; (12) Series

 4   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-
 5
     6; (21) Series 2008 H-7; (22) Series 2008 I; and (23) Series 2008 J.
 6
            31. The CPPOMs and CPOMs associated with all of the GVECR II offerings
 7
     represented that proceeds would be used primarily to purchase life insurance related
 8
     assets plus other assets to assure the stated rates, and were delivered to Hua Nan Bank
 9
     and Cosmos Bank, Taichung Bank, Coretech, and Entie, who were the five principal
10
     investors in the GVECR II Spy s. Some of the CPPOMs and CPOMs stated that the
11
     Issuer would purchase contestabilty period insurance and residual value insurance while
12
     others indicated that the portfolio would be secured by an insurance or reinsurance.
13
            32. The GVECR II debt offerings consisted of 30, 36 and 48 month
14   debentures paying varying rates of interest. Interest was payable quarterly and principal
15   was payable at maturity. The CPOMs stated that the proceeds of the offering would be
16   used to purchase term, non-recourse, premium finance loans for the purchase of and
17   secured by a senior interest in newly issued life insurance policies insuring high net
18   worth individuals over of the age of 70, plus other assets to assure at the Debenture
19   Holders return of stated principal plus the stated annual return. The CPOMs stated that
20   the underlying assets of the debentures would be held by a trustee in segregated

21   custodial accounts and would consist of a portfolio of non-recourse, premium finance

22   loans, a 24 month interest reserve and life insurance policies acquired through

23
     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-
24
     custodians would hold the invested capital and assets acquired with the proceeds of the
25
     offering, the interest reserves and proceeds of the investments.
26
            33. For instance, the following language appears In the CPPOMs and/or
27
     CPOMs for the GVECR II 2007 C, GVECR II 2008 Al and GVECR II 2008 G
28
                                             COMPLAINT
                                                - 13-                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                    Filed 05/14/10 Page 14 of 54




 1   offerings (which were delivered to investors on or around September 3,2007, January 1,
2    2008 and May 1,2008, respectively) under the "USE OF PROCEEDS" heading:

 3                The Issuer intends to use the Offering proceeds to engage in premium
           finance transactions, with the balance of proceeds used to pay (a) acquisition,
 4         servicing trustee, custodian and originatlOn fees, (b) management fees to the
           Manager, advisory fees to the Advisor, and (c) administrative fees and
 5         expenses associated with this Offering.
 6         The Issuer wil use the proceeds from the Offering to acquire assets (the "Assets")
           consisting of:
 7
                 . a portfolio of recourse and non-recourse premium finance loans
 8                    (the "Loans") for the purchase of, and secured by a senior security
                      interest in, newly-issued, non-variable life insurance policies (the
 9                    "Policies" insuring high-net-worth individuals over the age of 70
                      (the "Seniors');
10
                 . beneficial interest in a structured irrevocable life insurance trust (an
11                    "ILIT") that contains Policies;
12               . Policies acquired by the Issuer as a result of borrowers' Loan
                       defaults, voluntary relinquishment of Policies by borrowers to the
13                     Issuer in satisfaction of the Loans or through the secondary market;
                       and
14
                 . a twenty-four (24) month interest reserve.
15
                   The Issuer intends to acquire adequate Assets within three (3) months
16         of the Issuance Date to secure periodic interest payments and repayment of
           principal to Debenture Holders at the Maturity Date. The Assets underlying
17         the Debentues wil be held by a trustee in one or more segregated custodial
           accounts with the Issuer as beneficiar. The Issuer intends to commence
18         liquidation of adequate Assets not less than three (3) months prior to the
           Maturity Date to ensure payment of all principal and accrued but unpaid
19         interest at the Maturity Date.
20         34. In April 2007, Pang and the PEMGroup Management Team conducted a

21
     debt offering to raise money for an Spy called GVECR III Notes - Series 2007 A-4

22   ("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
23
     the notes. The notes were described as "asset backed securities." The CPOM stated that
24
     the net proceeds from the sale of the notes would be used by the issuer to acquire a
25
     portfolio of various infrastructure and time share assets and receivables. The
26
     Underlying Asset language was similar to that used in the GVECR IV offerings, as was
27
     the "Assurance and Assuror" language, although different Assurors, Swiss Re,
28
                                                       COMPLAINT
                                                          - 14-                             DOC. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1            Filed 05/14/10 Page 15 of 54




 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
 7
     invested capital and assets acquired with the proceeds of the offering.
 8
                MISUSE. DIVERSION AND MISAPPLICATION OF FUNDS
 9
            35. As early as July 2006, despite having raised over $75 milion from
10
     Standard Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank
11
     based upon representations that such funds would be loaned or invested in timeshare and
12
     infrastructure assets, Pang and the PEMGroup Management Team could not identify
13
     more than $30 milion in conforming investments, due in part to the fact that PEMGroup
14   was engaged in a dispute and/or litigation with Shell Vacations, which is the timeshare
15   company in which the Tranches had previously invested.
16          36. Because Pang and the PEMGroup Management Team had largely failed to
17   effectuate the timeshare deals that were described in CPOMs provided to Standard
18   Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank in
19   connection with its investments in the GVECR IV Notes A, Notes 2006 C and Notes
20   2006 D SPY s, the bulk of Standard Chartered Bank Taiwan Ltd. formerly known as
21   Hsinchu International Bank's $220 milion investment became a "slush fund" from
22   which Pang and the PEMGroup Management Team misdirected and misappropriated

23
     milions of dollars.
            37. Contrary to the explicit language in the CPPOMs and/or CPOMs regarding
24
     use of offering proceeds, starting at least as early as July 2006, Pang and the PEMGroup
25
     Management Team actually used the proceeds of various offerings for a variety of ilicit
26
     and undisclosed purposes, which included but were not limited to: (1) the purchase of
27
     impaired life insurance policies from earlier Tranches; (2) milions of dollars in loans to
28
                                              COMPLAINT
                                                  - 15 -                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1          Filed 05/14/10 Page 16 of 54




 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 ON
 7
                                   PROMISSORY NOTES
 8
           38. PEMGroup and the SPVs, GVEC, GVECII, GVECR II GVECR III and
 9
     GVEC iv, which were owned and controlled by PEMGroup affiliates and were
10
     ultimately controlled by Pang and the PEMGroup Management Team, are liable to the
11
     various Tranche investors on the $823 milion of remaining promissory notes,
12
     debentures 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;
23
    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.
24
           40. In addition, the following persons received up front start up Tranche fees
25
     as follows: Danny Pang, $11,733,541; Leon Chan, $12,680,666; and Rick Chen and
26
     James Yen, $1,302,500.
27
28
                                           COMPLAINT
                                               - 16-                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1          Filed 05/14/10 Page 17 of 54




 1              ALLEGATIONS RE EXCESSIVE CORPORATE EXPENSES
 2          41. Pang and the PEMGroup Management Team looted PEMGroup and the

 3   Spy s and their Tranches by spending lavishly and excessively on corporate expenses,

 4   including multiple lavish office locations, corporate jets, and travel and entertainment.
     These payments benefited Pang and the PEMGroup Management Team by enabling
 5
     them to project a false veneer of success and profitability, enabling them to raise further
 6
     funds from investors, and injured PEMGroup and the SPY s, rendering them unable to
 7
     pay their debts. These corporate expense payments exceeded $100 milion.
 8
                MISAPPLICATION AND CONVERSION OF ASSETS INTO
 9
                            NONCONFORMING INVESTMENTS
10
            42. Pang and the PEMGroup Management Team looted PEMGroup and the
11
     SPY s and their Tranches by diverting and misapplying Spy Tranche and PEMGroup
12
     funds into high risk and imprudent loans, equity investments, mezzanine debt, real estate
13
     loans, Chinese coal mines, undeveloped land in Costa Rica, and investment in Chinese
14   investment funds, in many cases accompanied by payment of fees, bonuses, and
15   commissions to themselves either directly or by indirectly diverting such funds to
16   themselves. These loans and investments benefited Pang. and the PEMGroup
17   Management Team and injuredPEMGroup and the SPY s, rendering them unable to pay
18   their debts.
19          43. Many of the loans from the Tranches were placed in lrigh risk hard money
20   loans, where the borrowers did not qualify for traditional bank financing. The rates on
21   such loans were higher than traditional bank loans, the term of the loans was short and

22   the loans funded quickly. Later Pang and the PEMGroup Management Team formed

23
     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
24
     gave a promissory note to the Tranches.
25

26
27
28
                                             COMPLAINT
                                                 - 17-                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1            Filed 05/14/10 Page 18 of 54




 1         MANY OF THE NONCONFORMING INVESTMENTS ARE IMPAIRßD.
 2                       CAUSING LOSS TO THE SPVS AND PEMGROUP

 3               44. Many of the diverted and misapplied loans, equity investments, mezzanine

 4   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
 5
     investment, rendering PEMGroup and the SPVs unable to pay their debts. Pang and the
 6
     PEMGroup Management Team invested over $225 milion into such unauthorized assets
 7
     which are      substantially impaired. The impaired status of the assets injures PEMGroup
 8
     and the SPY s, rendering them unable to pay their debts.
 9
                 45. As described above, all of the CPOMs for SPY Tranche offerings
10
     described in this Complaint stated that an Assurance or reinsurance or contestability
11
     period insurance policy or residual value insurance policy would be purchased to protect
12
     against loss and assure the return of principal plus the stated annual return. However
13
     Pang and the PEMGroup Management Team purchased a grossly inadequate amount of
14   such insurance, most of which was placed during the relevant time period with two
15   captive carriers, Fides Insurance Company, Ltd., and Irvine Insurance Company, Ltd.,
16   which were responsible for the first 10% of any loss. They did purchase some
17   reinsurance, but in a grossly inadequate amount, leaving most of the investments

18   unprotected against loss.
19                  CONSPIRACY AND AIDING AND ABETTING REGARDING
20                                 NET ASSET VALUE REPORTS

21               46. HSBC, Pang and the PEMGroup Management Team entered into a

22   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
23
     offered by PEMGroup and the Tranches, by lullng them into a false sense of security,
24
     and then to divert and misappropriate those funds for improper and unlawful purposes,
25
     and then to conceal the diversion and misappropriation of the funds.
26
                 47. HSBC, Pang and the PEMGroup Management Team acted in concert in
27
     furtherance of this conspiracy by distributing such false and misleading NA V Reports to
28
                                               COMPLAINT
                                                  - 18 -                            Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                                           Filed 05/14/10 Page 19 of 54




 1   investors, directing funds received from the investors to go to Pang and the PEMGroup
 2   Management Team instead of to purchase the promised assets, and directing wires of

 3   investor funds to unauthorized investments.

 4              48. HSBC acted in concert with, knowingly and substantially aided and

 5
     abetted; assisted; encouraged; conspired with; authorized, requested, commanded,
     ratified or recklessly tolerated the statements and actions of co-conspirators Pang and
 6
     the PEMGroup Management Team in order to further the scheme to defraud PEMGroup
 7
     and the Tranches; make false representations; omit or misstate material facts;
 8
     misrepresent the status of the Tranches; and create send, and fie false and misleading
 9
     documents.
10
                                                         KNOWLEDGE OF HSBC
11
                49. HSBC acted as the Cash Custodian for the Tranches and SPY s.
12
                50. HSBC, as Cash Custodian had a duty to hold and maintain the funds and
13
     assets the Tranches and Spy s acquired, pursuant to the terms of the CPPOMs and
14   CPOMs. The specified uses of the funds, and the details regarding the handling of the
15   invested capital and assets acquired with the proceeds of the offerings, and the' reports
16   regarding the assets, varied according to the terms of the CPPOMs and CPOMs as
17   described above.
18              51. HSBC as cash custodian was paid at least $1,874,000 in cash custodian
19   fees to perform its duties.

20              52. On each SPY Tranche, HSBC signed a letter setting forth the details of the

21   offering and accepting its duties.
                53. The offering proceeds were deposited into Master Accounts at HSBC and
22
23
     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
24
     PEMGroup, or on Tranche letterhead, or from the trustees. Therefore HSBC had
25
     firsthand knowledge of                   where the SPY Tranche funds were being expended. Milions of
26
     dollars of such funds were transferred to noncustodial accounts at East West Bank                                         in
27
     Irvine California, to accounts in the names of PEMGroup affiiates such as Jorei and
28
                                                                         COMPLAINT
                                                                               -19 -                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1            Filed 05/14/10 Page 20 of 54




 1   Zhongguo, to third party accounts of identified corporations and individuals or to title
 2   company escrow accounts relating to real estate loan transactions or to PEMGroup and

 3   its affiiates and PEMGroup Management for fees and commissions. These transfers

 4   circumvented the fundamental purpose of setting up custodial accounts and paying a
     cash custodian. HSBC therefore had firsthand information that the SPY Tranche funds
 5
     were not being expended to acquire life insurance policies and timeshare investments,
 6
     and were not being kept in segregated custodial accounts.
 7
            54. In connection with their fraudulent scheme, Pang, the PEMGroup
 8
     Management Team and HSBC caused false and misleading Net Asset Value ("NA V")
 9
     Reports to be distributed to certain investors. These reports, which were prepared by
10
     HSBC and had the HSBC logo affixed upon them, and were signed by an HSBC
11
     official, purported to represent the net asset value of an investor's investment in the
12
     applicable PEMGroup SPY, and were routinely distributed by Pang and PEMGroup
13
     from PEMGroup's Irvine, California offices., to personnel in PEMGroup's office in
14   Taipei, Taiwan, and from there to investors.
15          55. HSBC knew that the NA V reports were fraudulent because all it did was
16   to verify that it held the applicable promissory note to the investor. HSBC knew that it
17   had made no effort to locate, identify and value the life insurance assets or the timeshare
18   assets. HSBC knew that it had made no effort to trace the funds sent to East West Bank,
19   or to or through PEMGroup and its affiiates, or to locate the funds transferred into
20   unauthorized loans, equity investments, mezzanine debt, real estate loans, Costa Rica
21   land, Chinese coal mines or investments in Chinese investment funds and companies, or

22   to value such assets.

23
            56. The following are the dates and details regarding the NA V reports:

24     DOC               TRANCHE                 DATE            NAV                SIGNED
       TYPE                                                   AMOUNT                  BY
25     NAV       GVEC II CBO Series              8/1 0/06     $36,050,000.00       Not Signed
                 2006 SamDle 1 2 and 3
26     NAV       GVECRIVA                       10/31/06      $76.1 71.680.00      Not Signed
       NAV       GVECR CBO Series 2006          11/30/06         $4,580,437.50    Wilbur Quon
27               -PI
       NAV       GVECR IV A                     11/30/06      $76 534.760.00       Not Signed
28     NAV       GVECR CBO            Series    12/19/06         $4594331.25     Andres Serrano
                                               COMPLAINT
                                                  - 20-                              Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1      Filed 05/14/10 Page 21 of 54



               2006- F 1
 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
 2             -Fl
       NAV     GVEC II 36 Month Series 12/31/06         $55,456,805.56    Not Signed
 3             2006-A
       NAV     GVEC II 36 Month Series 12/31/06         $55,456,805.56    Not Signed
 4             2006-A
       NAV     GVEC II 36 Month Series 12/31/06         $55,456,805.56    Not Signed
 5             2006-A
       NAV     GVEC II 36 Month Series 12/31/06         $55,456,805.56    Not Signed
 6             2006-A
       NAV     GVEC II 36 Month Series 12/31/06         $55,456,805.56    Not Signed
 7             2006-A
 8
       NAV     GVEC II CDO 48 Month 12/31/06            $32,826,666.67    Not Signed
               Series 2006
 9
       NAV     GVEC II CDO 48 Month       12/31/06      $32,~26,666.67    Not Signed
               Series 2006
10     NAV     GVEC II CDO 48 Month       12/31/06      $32,826,666.67    Not Signed
               Series 2006
11     NAV     GVEC II CDO 48 Month       12/31/06      $32,826,666.67    Not Signed
               Series 2006
12     NAV     GVECR CBO Series 2006       1/31/07       $4,625,043.75   Wilbur Quon
               -Fl
13     NAV     GVECR iv A                  1/31/07      $77.298.480.00   Wilbur Ouon
       NAV     GVECR CBO Series 2006      2/1 0/07       $4,631,625.00   Wilbur Quon
14             -Fl
       NAV     GVECR iv 2006 C             2/28/07     $101.400.675.00   Wilbur Quon
15     NAV     GVECR iv A                  2/28/07      $75382,920.00    Wilbur Quon
       NAV     GVEC II 36 Month Series     3/31/07      $56,350,655.56    Not Signed
16             2006-A
       NAV     GVEC II CDO 48 Month        3/31/07      $32,206,666.67    Not Signed
17             Series 2006
       NAV     GVEC II CDO 48 Month        3/31/07      $32,206,666.67    Not Signed
18             Series 2006                                  ,

       NAV     GVECR iv 2006 C             3/31/07     $101,950,950.00    Wilbur l     uon
19     NAV     GVECR iv A                  3/31/07      $75,796,080.00    Wilbur i     uon
       NAV     GVECR iv 2006 C             4/30/07     $102.434.525.00    Wilbur       uon
20     NAV     GVECR iv A                  4/30/07      $76.159.160.00    Wilbur       uon
       NAV     GVECR iv 2006 C             5/31/07     $102,951.450.00    Wilbur       uon
21     NAV     GVECR iv A                  5/31/07      $76,547 280.00    Wilbur       uon
       NAV     GVECR iv 2006 C             6/7 /07     $103,051,500.00    Wilbur       uon
22     NAV     GVECR iV A                  6/30/07       76910.360.00     Wilbur       uon
       NAV     GVECR iv A                  7/31/07       77.298.480.00    Wilbur       uon
23     NAV     GVECR iv A                  8/7 /07       77.373.600.00    Wilbur       uon
       NAV     GVEC II Series 2006-A      12/31/07       55.456.805.56     Not Signed
24     NAV     GVEC II CDO Series         12/31/07       32,826,666.67     Not Signed
               2006
25     NAV     GVEC II CDO Series         12/31/07      $32,763,111.11        Not Signed
26             2006
       NAV     GVECR CBO Series 2006       1/31/08       $4,625,043.75 Nelson Kercado
27             -Fl
       NAV     GVECR iV 2006 C             1/31/08        $100950450 Nelson Kercado
28     NAV     GVECR iv 2006 D             1/31/08         $80.399 780   Nelson Kercado
                                         COMPLAINT
                                            - 21 -                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1      Filed 05/14/10 Page 22 of 54



       NAV     GVECR iv A                  1/31/08       $77.298 480 Nelson Kercado
 1     NAV     GVECR iv A                  2/7 /08     $77373.600.00 Nelson Kercado
       NAV     GVECR iv 2006 C            2/29/08     $101.417350.00 Nelson Kercado
 2     NAV     GVECR iv 2006 D            2/29/08      b80.772.926.67 Nelson Kercado
       NAV     GVECR iv A                 2/29/08       75395.440.00 Nelson Kercado
 3     NAV     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
 4             2006
 5
       NAV     GVECR CBO Series 2006       3/31/08       $5,074,027.78 Nelson Kercado
               -B
 6
       NAV     GVECR iv 2006 C             3/31/08     $101 950.950.00 Nelson Kercado
       NAV     GVECR iv 2006 D             3/31/08      $81 199.380.00 Nelson Kercado
 7     NAV     GVECR iv A                  3/31/08      $75 796.080.00 Nelson Kercado
       NAV     GVECR iv 2006 C             4/30/08     $102434525.00 Nelson Kercado
 8     NAV     GVECR iv 2006 D             4/30/08      $81 585 853.33 Nelson Kercado
       NAV     GVECR iv A                  4/30/08      $76.159.160.00 Nelson Kercado
 9     NAV     GVECR iv 2006 C             5/31/08     $102.951.450.00 Nelson Kercado
       NAV     GVECR iv 2006 D             5/31/08      $81.998.980.00 Nelson Kercado
10     NAV     GVECR iv A                  5/31/08      $76.547.280.00 Nelson Kercado
       NAV     GVECR CBO Series 2006       6/30/08       $4,602,375.00 Nelson Kercado
11             -Fl
       NAV     GVEC II Series 2006-A       6/30/08     -l55.446.875.00      Not Signed
12     NAV     GVEC II CDO Series          6/30/08     -l32,504,444.44      Not Signed
               2006
13     NAV     GVECR CBO Series 2006       6/30/08       $5,154,375.00 Nelson Kercado
               -B
14     NAV     GVECR iv 2006 C             6/30/08     $100.433.525.00    Nelson Kercado
       NAV     GVECR iv 2006 D             6/30/08      $79.986.653.33    Nelson Kercado
15     NAV     GVECR iv A                  6/30/08      $76.910.360.00    Nelson Kercado
       NAV     GVECR iv 2006 C             7/31/08     $100.950.450.00    Nelson Kercado
16     NAV     GVECR iv A                  7/31/08      $ 77.298.480.00   Nelson Kercado
       NAV     GVECR iv 2006 D             7/31/08      $ 80.399.780.00   Nelson Kercado
17     NAV     GVECR II Series 2008 H-     8/31/08        $8,540,729.17   Nelson Kercado
               6
18     NAV     GVECR II Series 2008 H-     8/31/08      $12,439,320.83 Nelson Kercado
               6
19     NAV     GVECR iv 2006 C             8/31/08     $101.450.700.00    Nelson Kercado
       NAV     GVECR iv 2006 D             8/31/08      $80.799.580.00    Nelson Kercado
20     NAV     GVECR iv A                  8/31/08                        Nelson Kercado
                                                        $75.420.480.00
21
       NAV     GVECR CBO Series 2006       9/30/08       $4,536,562.50    Nelson Kercado
               -Fl
22     NAV     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 Signed
23             2006
       NAV     GVECR II Series 2008 H-     9/30/08      $12,498,641.67 Nelson Kercado
24             6
       NAV     GVECR II Series 2008 H-     9/30/08       $8,581,458.33    Nelson Kercado
25             7
       NAV     GVECR II Series 2008 J     9/30/08       $15.685.436.63    Nelson Kercado
26     NAV     GVECR iv 2006 C            9/30/08      $101.934.275.00    Nelson Kercado
       NAV     GVECR iv 2006 D            9/30/08        81.186.053.33    Nelson Kercado
27     NAV     GVECR iv A                 9/30/08        75,783,560.00    Nelson Kercado
       NAV     GVECR II Series 2008 H-    10/31/08       12,557,962.50    Nelson Kercado
28             6
                                         COMPLAINT
                                            - 22-                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1     Filed 05/14/10 Page 23 of 54



       NAV     GVECR II Series 2008 H-    10/31/08      $8,622,187.50 Nelson Kercado
 1             7
       NAV     GVECR II Series 2008 J     10/31/08     $15759.419.42 Nelson Kercado
 2     NAV     GVECR iv 2006 C            10/31/08    $102.451.200.00 Nelson Kercado
       NAV     GVECR iv 2006 D            10/31/08      81.599 180.00 Nelson Kercado
 3     NAV     GVECR iv A                 10/31/08      76.1 71 680.00 Nelson Kercado
       NAV     GVECR II Series 2008 H-    11/30/08      12,586,325.00 Nelson Kercado
 4             6
       NAV     GVECR II Series 2008 H-    11/30/08      $8,662,916.67 Nelson Kercado
 5             7
       NAV     GVECR II Series 2008 J     11/30/08     $15.758,685.42   Nelson Kercado
 6     NAV     GVECR iv 2006 C            11/30/08   -$102,934,775.00   Nelson Kercado
       NAV     GVECR iv 2006 D            11/30/08      81.985.653.33   Nelson Kercado
 7                                                                      Nelson Kercado
       NAV     GVECR iv A                 11/30/08      63.238.985.00
 8     NAV     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
 9             2006
       NAV     GVECR CBO 2006 - Fl        12/31/08      $4.603.i 06.25 Nelson Kercado
10     NAV     GVECR CBO Series 2006      12/31/08      $5,155,277.78 Nelson Kercado
               -B
11     NAV     GVECR II Series 2008 H- 12/31/08        $12,625,406.25 Nelson Kercado
               6
12     NAV     GVECR II Series 2008 H- 12/31/08         $8,703,645.83   Nelson Kercado
               7
13     NAV     GVECR II Series 2008 J 12/31/08         TI5.830.331.94   Nelson Kercado
       NAV     GVECR iv 2006 C        12/31/08        $100.450.200.00   Nelson Kercado
14     NAV     GVECR iv 2006 D        12/31/08         $79,999.980.00   Nelson Kercado
       NAV     GVECR iv A             12/31/08         $63.559.680.00   Nelson Kercado
15     NAV     GVECR CBO Series 2006 1/31/09            $4,625,043.75   Nelson Kercado
               -Fl
16     NAV     GVECR II Series 2008 H-     1/31/09     $12,684,487.50 Nelson Kercado
               6
17     NAV     GVECR II Series 2008 H-     1/31/09      $8,744,376.00 Nelson Kercado
               7
18     NAV     GVECR II Series 2008 J      1/31/09    -$15901.602.78    Nelson Kercado
       NAV     GVECR iv 2006 C             1/31/09    $100950.450.00    Nelson Kercado
19     NAV     GVECR iv 2006 D             1/31/09      80399.780.00    Nelson Kercado
       NAV     GVECR iv A                  1/31/09      63.870030.00    Nelson Kercado
20     NAV     GVECR II Series 2008 H-     2/28/09      12,739,630.00   Nelson Kercado
               6
21     NAV     GVECR II Series 2008 H-     2/28/09      $8,782,388.89 Nelson Kercado
               7
22     NAV     GVECR II Series 2008 J      2/28/09     $15.965.746.53   Nelson Kercado
       NAV     GVECR iv 2006 C             2/28/09    $101.400.675.00   Nelson Kercado
23     NAV     GVECR iv 2006 D             2/28/09      80.759.600.00   Nelson Kercado
24     NAV     GVECR iv A                  2/28/09      60.450.840.00   Nelson Kercado
       NAV     GVECR II Series 2008 J      3/31/09      16.044.144.44   Nelson Kercado
25     NAV     GVECR II Series 2008 H-     3/31/09      12,802,650.00   Nelson Kercado
               6
26     NAV     GVECR iv 2006 C             3/31/09      87,898.940.00   Nelson Kercado
       NAV     GVECR iv A                  3/31/09      60.782.160.00   Nelson Kercado
27     NAV     GVECR iv 2006 D             3/31/09      76.172.655.00   Nelson Kercado
       NAV     GVECR II Series 2008 H-     3/31/09      $8,825,633.33   Nelson Kercado
28             7
                                         COMPLAINT
                                            - 23-                            Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1          Filed 05/14/10 Page 24 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:

 4
      DOC       DATE          TRANCHE             TO              FROM             CC
 5    TYPE
      E-mail   12/19/06   GVECR      CBO     Wilbur Quon,     Andres
 6                        Series 2006 F 1    PEMG             Serrano,
                                                              HSBC
 7    E-mail   12/19/06   GVECR      CBO Ann Ru,              Wilburn Quon,   Chan, L.
                          Series 2006 F 1                     PEMG
 8    E-mail   3/28/08    GVECR         iV   Sheryl Perez,    Nelson
                          Notes A            PEMGroup         Kercado,
 9                        GVECR         iV                    HSBC
                          Notes C
10                        GVECR         iV
                          Notes D
11    E-mail   4/7 /08    GVECR CVO Sheryl Perez, Nelson
                          Series 2006-B   PEMGroup   Kercado,
12                                                   HSBC
      E-mail   4/7 /08    GVECR 2006- Phoebe         Sheryl Perez,            Ru,A.
13                        B               Chang, ERM PEMGroup                 Day, V.
                                          Resource,                           Chan, L.
14                                        Ltd.                                Quon. W.
      E-mail   4/24/08    GVECR        iV Phoebe     Sheryl Perez,            Ru,A.
15                        Notes A         Chang, ERM PEMGroup                 Day,V.
                          GVECR        iV Resource,                           Nguyen, H..
16                        Notes C         Ltd.                                Quon, W.
                          GVECR        iV                                     Leanilo, L.
17                        Notes D
      E-mail   5/23/08    GVECR         iV Phoebe             Sheryl Perez,   Ru,A.
18                        Notes A          Chang, ERM PEMGroup                Quon, W.
                          GVECR         iV Resource,                          Nguyen, H.
19                        Notes C          Ltd.                               Leanilo, L.
                          GVECR         iV
20                        Notes D
      E-mail   6/18/08    GVECR 2006-         Sheryl Perez,   Nelson
21                        B                   PEMGroup        Kercado,
                                                              HSBC
22    E-mail   7/2/08     GVECR         iV Phoebe             Sheryl Perez,   Ru,A.
                          Notes A          Chang, ERM PEMGroup                Quon, W.
23                        GVECR         iV Resource,                          Nguyen, H.
                          Notes C          Ltd.                               Leanilo, L.
24                        GVECR         iV
                          Notes D
25    E-mail   7/2/08     GVECR         iV    Sheryl Perez,   Nelson          Nguyen, H.
                          Notes A             PEMGroup        Kercado,        Leanilo, L.
26                        GVECR         iV                    HSBC            Quon, W.
                          Notes C
27                        GVECR         iV
                          Notes D
28
                                             COMPLAINT
                                                -24 -                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1           Filed 05/14/10 Page 25 of 54



      E-mail   7/15/08    GVECR       CBO Phoebe         Perez, S.           Quon, W.
 1                        Series 2006 F 1  Chang, ERM                        Chan, L.
                                           Resource,                         Day, V.
 2                                         Ltd.                              Ru,A.
      E-mail   07/21/08   GVECR CBO Sheryl Perez, Nelson                     Nguyen, H.
 3                        Series 2006 F 1  PEMGroup      Kercado,            Leanilo, L.
                                                         HSBC                Quon, W.
 4    E-mail   8/1/08     GVECR         iv Sheryl Perez, Nelson
                          Notes A          PEMGroup      Kercado,
 5                        GVECR         iv               HSBC
                          Notes C
 6                        GVECR        iv
                          Notes D
 7    E-mail   8/1/08     GVECR        iv    Phoebe     Sheryl Perez, Quon, W.
                          Notes A            Chang, ERM PEMGroup      Nguyen, H.
 8                        GVECR        iv    R"esource,               Leanilo, L.
                          Notes C            Ltd.
 9                        GVECR        iv
                          Notes D
10    E-mail   9/4/08     GVECR        iv    Phoebe     Sheryl Perez, Nguyen, H.
                          Notes A            Chang, ERM PEMGroup      Leanilo, L.
11                        GVECR        iv    Resource,                Quon, W.
                          Notes C            Ltd.
12                        GVECR        iv
                          Notes D
13                        GVECR II 2008
                          H7
14                        GVECR II 2008
                          H6
15    E-mail   10/6/08    GVECR      iv Phoebe     Sheryl Perez,             Quon, W.
                          Notes A       Chang, ERM PEMGroup                  Chan, L.
16                        GVECR      iv Resource,                            Day, V.
                          Notes C       Ltd.                                 Lin, V.
17                        GVECR      iv                                      Leanilo, L.
                          Notes D                                            Nguyen, H.
18                        GVEC       CBO
                          Series 2006 B
19                        GVECR II 2008
                          H7
20                        GVECR II 2008
                          H6
21                        GVECR II 2008
                          J
22                        GVEC       CVO
                          Series 2006 F 1
23    E-mail   10/31/08   GVECR      iv      Phoebe     Sheryl Perez, Nguyen, H.
                          Notes       A      Chang, ERM PEMGroup      Leanilo, L.
24                        GVECR      iv      Resource,                Quon, W.
                          Notes       C      Ltd.
25                        GVECR      iv
                          Notes       D
26                        Taichung 2008
                          H6
27                        Coretech 2008
                          H7
28
                                            COMPLAINT
                                               - 25-                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1         Filed 05/14/10 Page 26 of 54



                             Taichung 2008
 1                           J
 2

 3
      E-mail   12/2/08       GVECR      iv Sheryl Perez, Nelson
 4                           Notes       A PEMGroup      Kercado,
                             GVECR      iv               HSBC
 5                           Notes       C
                             GVECR      iv
 6                           Notes       D
                             Taichung 2008
 7                           H6
                             Coretech 2008
 8                           H7
                             Taichung 2008
 9                           J
      E-mail   1/7/09        GVECR      iv Sheryl Perez, Nelson            Nguyen, H.
10                           Notes       A PEMGroup      Kercado,          Leanilo, L.
                             GVECR      iv               HSBC              Quon, W.
11                           Notes       C
                             GVECR      iv
12                       .
                             Notes       D
                             Taichung 2008
13                           H6
                             Coretech 2008
14                           H7
                             Coretech CBO
15                           2006- B
                             Taichung 2008
16                           J
                             TS Super Fund
17    E-mail   2/3/09        GVECR       iv Sheryl Perez, Nelson           Nguyen, H.
                             Notes        A PEMGroup      Kercado,         Leanilo, L.
18                           GVECR       iv               HSBC.            Quon, W.
                             Notes        C
19                           GVECR       iv
                             Notes        D
20                           Taichung 2008
                             H6
21                           Coretech 2008
                             H7
22                           Taichung 2008
                             J
23                           TS Super Fund
      E-mail   3/2/09        GVECR       iv Sheryl Perez, Nelson            Nguyen, H.
24                           Notes        A PEMGroup      Kercado,          Leanilo, L.
                             GVECR       iv               HSBC              Quon, W.
25                           Notes        C
                             GVECR       iv
26                           Notes        D
                             Taichung 2008
27                           H6
                             Còretech 2008
28
                                             COMPLAINT
                                                - 26-                            Doc. #600752v.2
     Case 2:10-cv-03669-GHK -E Document 1                               Filed 05/14/10 Page 27 of 54



                                              H7
 1                                            Taichung    2008
                                              J
 2    E-mail          4/3/09                  GVECR        iv     Sheryl Perez,      Nelson        Nguyen, H.
                                              Notes         A     PEMGroup           Kercado,      Leanilo, L.
 3                                            GVECR        iv                        HSBC          Quon, W ~
                                              Notes         C
 4                                            GVECR        iv
                                              Notes          D
 5                                            Taichung    2008
                                              H6
 6                                            Coretech    2008
                                              H7
 7                                            Taichung    2008
                                              J
 8
                 58. In several respects, these NA V Reports were materially false and
 9
     misleading. First of all, some of the reports were prepared and distributed by the
10
     PEMGroup Management Team, using HSBC letterhead provided by HSBC. Indeed, on
11
     December 19,2006, a PEMGroup employee sent Pang and PEMGroup's CFO an email,
12
     in which she stated that: "I am aware that recent NA Vs are issued by you NOT HSBC,
13
     why?"
14               59. Additionally, these supposed NA V Reports were false and misleading as

15   they merely confirmed the face value (e.g., the amount invested by an investor) of
16   particular assets, as opposed to the actual NAVas of the date or the report. Typically,
17   the term "net asset value" denotes the market value of a particular asset, as of a
18   particular date, minus any liabilties associated with that asset.
19               60. The false and misleading NA V reports were a significant factor in
20   concealing the frauds being perpetrated by Danny Pang and The PEMGroup
21   Management Team from the investors and                            others. Truthful NA V reports would have

22   revealed that Tranche and PEMGroup assets w:ere being diverted and misappropriated,

23
     would have revealed that life insurance and timeshare assets were significantly
     impaired, and would have revealed that hundreds of                        milions of   Tranche and PEMGroup
24
     funds had been diverted and misapplied into unauthorized assets which were
25
     significantly impaired. Had the frauds been revealed earlier, they would have been
26
     stopped and investigated, preventing milions of dollars of losses.
27
28
                                                                 COMPLAINT
                                                                    - 27-
                                                                        fii'
                                                                                                       Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                Filed 05/14/10 Page 28 of 54




 1              61. In most instances, the value of the assets held by the Spy shad

 2   significantly declined after the date of the applicable offering. For instance, the entire
 3   market for life insurance assets was severely depressed between 2007 and 2008, and yet

 4   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
 5
     by Pang and PEMGroup. However, the resulting diminution in value of the affected
 6
     SPVs was not reflected in the NA V Reports.
 7
                 62. Because many of the Tranche funds had been distributed to or loaned to
 8
     Pang and the PEMGroup Management Team, loaned to PEMGroup to pay
 9
     compensation or expenses, or diverted into unauthorized assets which were substantially
10
     impaired, the diminution value of        the Spy was not reflected in the NA V reports.
11
                63. HSBC made no effort to identify, or locate any Spy assets to value them.
12
     It made no effort to value the life insurance policies. It knew or was recklessly
13
     indifferent to the fact that hundreds of millons of dollars of assets had been diverted
14   elsewhere but made no effort to trace or value assets acquired with the funds.
15                                   IMPROPER LOANS AND THEFTS BY PANG
16               64. At least as early as July 2007, Pang began to take unsecured and interest-

17   free personal "loans" from several of the SPVs and other PEMGroup related entities,
18   which contained proceeds of offerings. The overwhelming majority of these supposed
19   loans were never repaid to the SPVs or PEMGroup affiliates.
20               65. For instance, on or around July 26, 2007, Pang caused ERML (a

21   PEMGroup entity) to loan $1 milion to Nevada Capital Partners ("NCP"), which is an

22   entity controlled by Pang.
                 66. Subsequently, on or around August 23, 2007, Pang caused ERML to lend
23
     him $650,000.
24
                 67. In 2008 alone, Pang received total compensation from PEMGroup in the
25
     amount of $32.9 milion. Irrespective of the fact that he caused PEMGroup to pay him
26
     huge amounts of money in salary, as well as in questionable bonuses and commissions,
27
28
                                                   COMPLAINT
                                                      - 28-                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1         Filed 05/14/10 Page 29 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 iv
     Notes 2006 D that contained investor funds), in which she requested that East West
 7
     Bank, upon approval from Pang, transfer $2 milion from a GVECR iv account to
 8
     LSPC's account.
 9
           69. In response to the Controller's email, Pang sent the following reply email
10
     to the Controller and the East West Bank representative: "Please accept this email as my
11
     approval. Thanks."
12
           70. 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.,
26
     GVECR iv Notes A, GVECR iv Notes 2006 C, GVECR iv Notes 2006 D, GVECR II
27
     2007 C, GVECR II 2008 A and GVECR II 2008 G) never disclosed to investors the
28
                                           COMPLAINT
                                               - 29.                              Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1          Filed 05/14/10 Page 30 of 54




 1   material fact that the proceeds of offerings could or would be used to make personal and
 2   unsecured loans to Pang and/or entities controlled by Pang, such as LSPC, NCP and
 3   NDCP.
            77. Similarly, investors in the pertinent SPVs were never otherwise informed
 4
     that the proceeds of offerings could be used (and had been used) to make personal and
 5
     unsecured loans to Pang and/or entities controlled by Pang, such as LSPC, NCP and
 6
     NDCP.
 7
            78. In a February 9, 2009 memorandum to Pang and the other PEMGroup
 8
     partners, PEMGroup's General Counsel acknowledged that the loans made to Pang and
 9
     the entities controlled by Pang were "clearly outside the CPOMs and a clear breach of
10
     our contractual and fiduciary obligations owned to investors."
11
            79. In addition to the undisclosed "loans" that Pang caused the SPY s to make
12
     to him, between 2007 and 2008 Pang misappropriated $13 milion from the SPY sand
13
     used it to pay unearned "commissions" to himself and to his associates.
14          80. Typically, Pang and the PEMGroup Management Team paid themselves
15   commissions in connection with its acquisition of life insurance policies on behalf of
16   investors. These "commissions," which were 4% of the face value of the underlying
17   policy, were supposed to be paid to Pang and PEMGroup after they had acquired the
18   pertinent life insurance contracts.
19          81. Starting in late 2007, however, Pang directed the payment of

20   "commissions" on life insurance policies that PEMGroup had not acquired or purchased.

21   The money to pay these so-called commissions was "borrowed" from several of the

22   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
23
     GVECR II 2008 i.
24
            82. The deals upon which the improper commissions were based were never
25
     consummated. Nevertheless, as of May 1, 2009, the PEMGroup Management Team
26
     members and PEMGroup executives that received the unearned $13 milion in
27
     commissions associated with the failed deals have not repaid them.
28
                                            COMPLAINT
                                                - 30-                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                                      Filed 05/14/10 Page 31 of 54




 1          83. Investors in the pertinent GVECR II SPVs were never given the material

 2   information that the proceeds of offerings would be used to pay commissions to
 3   PEMGroup Management Team members or PEMGroup executives for deals that never

 4   happened.
            84. Moreover, in March 2007, Pang misappropriated an additional $4 milion
 5
     from several Spy s. PEMGroup had accused its former president of embezzling
 6
     approximately $4 milion by causing several of the PEMGroup affiiated SPVs to pay
 7
     inflated amounts for life insurance policies, and then keeping a percentage of the
 8
     inflation for himself.
 9
            85. In March 2007, the former president attempted to pay $4 milion back to
10
     the Tranches in settlement of those accusations. However, rather than depositing it into
11
     the accounts of the appropriate SPVs, on March 13, 2007 Pang immediately
12
     misappropriated the $4 milion by depositing the money into an account that he
13
     controlled at East West Bank.
14          86. The account at East West Bank was in the name of GVEC Resource IV,
15   Inc. The mailing address for the account was the same address as PEMGroup's Irvine,
16   California offices: GVEC Resource IV, Inc., c/o Equity Resource Management, Ltd.,
17   One Park Place Plaza, Suite 550, Irvine, California 92614.
18          87. This account was created in connection with the formation of                                  the GVECR
19   IV Spy s. But rather than close the account after the GVECR IV Spy s had been created
20   and funded, Pang instruCted that it be kept open for his personal and exclusive use.
21   Indeed, Pang kept a check book for this account in his desk drawer and repeatedly wrote

22   checks on this account for personal matters.
            88. Once the $4 milion was deposited into the GVEC Resource IV account at
23
     East West Bank, which Pang exclusively controlled, Pang proceeded to divide and
24
     distribute these funds amongst PEMGroup's senior management and kept more than $2
25
     milion for himself.
26
            89. For instance, on or around March 13,2007, Pang wrote himself a check in
27
     the amount of $500,000, which was drawn from the GVEC Resource IV account at East
28
                                                                   COMPLAINT
                                                                          - 3 i -                              Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1        Filed 05/14/10 Page 32 of 54




 1   West Bank where the $4 milion that had been returned by the former PEMGroup
 2   president had been deposited.

 3         90. Similarly, on or around March 13,2007, Pang wrote a check for $1 milion

 4   to Nevada Capital Holdings, an entity controlled by Pang, which was drawn from the
     GVEC Resource iv account at East West Bank.
 5
           91. On or around March 13, 2007, Pang wrote a check for $250,000 to
 6
     Sundulas, an entity controlled by a senior PEMGroup employee, which was drawn from
 7
     the GVEC Resource iv account at East West Bank.
 8
           92. Again, on     or around March 13, 2007, Pang wrote a check for $250,000 to
 9
     Q2 Resources, an entity controlled by PEMGroup's CFO, which was drawn from the
10
     GVEC Resource iv account at East West Bank.
11
           93. On or around March 17, 2007, Pang wrote himself a check for $600,000,
12
     which was drawn from the GVEC Resource iv account at East West Bank.
13
           94. On or around April 12, 2007, Pang wrote himself a check for $550,000,
14   which was drawn from the GVEC Resource iv account at East West Bank.
15         95. On or around May 11, 2007, Pang wrote a $200,000 check for "CASH",

16   which was drawn from the GVEC Resource iv account at East West Bank where the $4
17   milion in investor funds that had been returned by the former PEMGroup president had
18   been deposited.

19         96. On or around July 7, 2007, Pang wrote himself a check for $600,000,
20   which was drawn from the GVEC Resource iv account at East West Bank.

21      IMPROPER LOANS AND DIVERSION OF FUNDS TO PAY PEMGROUP

22                                       EXPENSES
           97. At least as early as October 2006 and continuing through 2009, Pang and
23
     the PEMGroup Management Team began using Tranche funds to make undisclosed
24
     loans to PEMGroup to fund its lavish operating expenses. PEMGroup expended over
25
     $100 milion in exorbitant expenses in this manner. By October 2006, PEMGroup's
26
     bum rate had become unsustainable as result of the profligate spending that the
27
     company undertook at Pang's direction. Because PEMGroup's expenses were in excess
28
                                          COMPLAINT
                                              - 32-                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1          Filed 05/14/10 Page 33 of 54




 1   of even the exorbitant amounts that Pang and PEMGroup took in fees and commissions,
 2   Pang was forced to identify alternate sources of funding to keep pace with PEMGroup's

 3   expenses.
            98. At leàst as early as October 2006, Pang decided to use the Tranche funds
 4
     that had already been raised, as well as funds that would be raised by PEMGroup in the
 5
     future, in order to pay PEMGroup's operating expenses. Specifically, Pang caused the
 6
     SPV s to make loans to PEMGroup, which, in turn, used the funds for various operating
 7
     expenses of the company, which include but are not limited to: payroll costs, the
 8
     opening of a new PEMGroup office in Shanghai, a 2007 Christmas party in China
 9
     (which was attended by employees from all PEMGroup offices) and a three-day 2008
10
     Christmas party aboard a Disney cruise ship (which was attended by employees from all
11
     PEMGroup offices).
12
            99. For instance, on or around October 10, 2006, Pang and the PEMGroup
13   Management Team caused GVECR iv 2006 A to lend PEMGroup $2 milion. Pang
14   and the PEMGroup Management Team then used this $2 milion to pay the operating
15   expenses (e.g., rents and salaries) associated with PEMGroup's sales office in Taipei.
16          100. On or around January 23, 2007, Pang and the PEMGroup Management
17   Team caused GVECR iv 2006 C to lend PEMGroup $ 1 milion. Pang and the
18   PEMGroup Management Team then used this $1 milion to pay the operating expenses
19   (e.g., rents and salaries) associated with PEMGroup's office in Shanghai.
20          101. On or around June 5, 2007, Pang and the PEMGroup Management Team

21   caused GVECR iv 2006 D to lend PEMGroup over $4 milion. Pang and the
22   PEMGroup Management Team then used this $4 milion to pay the various expenses

23   (e.g., registered capital, rents and salaries) associated with PEMGroup's office in
     Shanghai.
24
            102. Additionally, on or around November 26, 2007, Pang caused GVECR iv
25
     2006 C to lend $1.5 milion to PEMGroup. On November 21,2007, PEMGroup's CFO
26
     wrote an email to Pang, which informed him that, "We have only $18k in available limit
27
     on our AMEX and i project a cash need of $ 1 .3M by the end of next week and i haven't
28
                                            COMPLAINT
                                                - 33-                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                      Filed 05/14/10 Page 34 of 54




 1   received the Global Exec invoice for the Dubai trip yet." In the email, the CFO asked
 2   Pang whether he had, "Any thoughts on how we are going to service our cash crunch(,)"

 3   and whether Pang could "borrow funds from GVECR IV." On November 21, 2007,

 4   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
 5
     an additional $1.5 milion to PEMGroup in order to fund the company's operating
 6
     expenses, which included, but were not limited to,                credit card bils, salaries and a
 7
     company trip to China. On December 14, 2007, the Controller for PEMGroup asked in
 8
     an e-mail that Pang and PEMGroup's CFO approve an "inter-account transfer of
 9
     $1,500,000 from GVECR IV... to PEMG." Approximately thirty minutes after the
10
     Controller's request, Pang responded, "That's fine. Thanks." The Controller then asked
11
     the CFO to approve the transaction as well, which he did.
12
                 104. On or around January 1, 2008, Pang caused GVECR IV Notes A to lend
13
     PEMGroup $1 milion, in order to provide a $1 milion dollar retainer to the law firm
14   Fulbright and Jaworski LLP, which had been hired to perform services wholly unrelated
15   to the GVECR IV Notes A SPV.
16               105. On or around January 11,2008, Pang caused GVECR IV Notes A to lend
17   PEMGroup $200,000 to enable the company to meet its operating expenses, which
18   included, but were not limited to, company credit card bils and payroll costs.
19               106. On or around January 22, 2008, Pang caused GVECR IV 2006 C to lend
20   PEMGroup $500,000, which the company then used to pay its operating expenses,
21   which included, but were not limited to, credit card bils and payroll costs. On January

22   22, 2008, PEMGroup's Controller asked that Pang and PEMGroup's CFO approve a

23
     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."
24
                 107. On or around January 29,2008, Pang caused GVECR iV 2006 C to lend
25
     PEMGroup $300,000, which the company then used to pay its operating expenses,
26
     which included, but were not limited to, credit card bils and payroll costs. On January
27
     29,2008, PEMGroup's Controller requested that Pang approve a $300,000 wire transfer
28
                                                          COMPLAINT
                                                             - 34-                            Doc. #600752 V.2
     Case 2:10-cv-03669-GHK -E Document 1         Filed 05/14/10 Page 35 of 54




 1   from GVECR iv 2006 C to PEMGroup. One minute later on January 29, 2008, Pang
 2   sent the Controller the following email response: "approved."

 3          108. On or about July 28, 2008, Pang caused GVECR II 2007 C to loan
 4   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
 5
     C to PEMGroup. Within a few minutes, Pang responded via e-mail that the transfer was
 6
     "approved. "
 7
            109. On November 19, 2008, Pang caused GVECR iv 2006 C to loan
 8
     PEMGroup $500,000. On November 19,2008, PEMGroup's Controller informed Pang,
 9
     as well as the COO and CFO of PEMGroup, that "(p )ayment of the AMEX is due in full
10
     today and we need to remit at least $100K to Taipei for their November expenses.
11
     Kindly approve PEMG to borrow $500K from GVECR iv 2006 C." Approximately 6
12
     hours later on November 19,2008, Pang sent the following email response: "Approve."
13
            110. On or about November 26,2008, Pang caused GVECR II 2007 C to lend
14   $1.5 milion to PEMGroup. On November 26, 2008, PEMGroup's Controller informed
15   Pang and PEMGroup's COO that, "We have some payables due to be paid today
16   including payroll, payment for Disney Cruise, remittance to Taipei and monthly
17   expenses." The Controller asked that Pang approve a $1.5 milion loan from GVECR II
18   2007 C to PEMGroup, and also informed Pang that "...we wil need additional $500K by
19   the week of December 8th." A few minutes after receipt of the Controller's November
20   26, 2008" Pang responded and wrote, "Please accept this email as my approval for both

21   $ 1.5 mil and $500,000 transaction."

22          111., The CPPOMs and CPOMs associated with the affected SPY s never
     disclosed to investors the plainly material information that the proceeds of offerings
23
     could be used to make "loans" to PEMGroup to enable the company to fund its
24
     exorbitant operating expenses.
25
            112. Similarly, investors in the pertinent SPVs were never otherwise informed
26
     of the material information that the proceeds of offerings could be used (and had been
27
28
                                            COMPLAINT
                                               - 35-                             DOC. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                                           Filed 05/14/10 Page 36 of 54




 1   used) to make loans to PEMGroup to fund its exorbitant operating expenses. As of                                     May

 2   1,2009, PEMGroup owes the SPVs approximately $17 milion in outstanding loans.

 3       UNAUTHORIZED LOANS TO PEMGROUP TO FUND THE COMPANY'S

 4                                                 ACQUISITION OF AIRCRAFT

 5
                 113. In addition to the undisclosed loans to PEMGroup for its operating
     expenses, in 2007, Pang and the PEMGroup Management Team caused Tranche funds
 6
     to be utilized to make loans to PEMGroup for the purpose of aircraft acquisitions. On
 7
     March 14, 2007, Pang and the PEMGroup Management Team caused a $2.1 milion
 8
     loan to be made from GVECR IV 2006 C to InterTravel and Services, Inc., an entity
 9
     controlled by Pang and PEMGroup.
10
                 114. In June 2007, Pang and the PEMGroup Management Team caused an $18
11
     milion loan to be made from GVECR IV 2006 D to InterTravel and Services, Inc.,
12
     which is an entity controlled by Pang and PEMGroup. This $18 milion dollar loan was
13
     used to fund the purchase of a Gulfstream G4 aircraft for PEMGroup. The investor in
14   GVECR IV 2006 D was never told that the proceeds of the offering could be used (and
15   had been used) to make loans to PEMGroup for the purpose of purchasing aircraft for
16   the company.
17               115. On October 16,2007, Pang and the PEMGroup Management Team caused
18   an $11 milion loan to be made from GVECR II 2007 C to Inter Travel and Services,
19   Inc. This $11 milion dollar loan was used to fund the purchase of Lear Jet aircraft for
20   PEMGroup. The investor in GVEC II 2007 C was never told that the proceeds of the
21   offering (and had been used) to make loans to PEMGroup for the purchase of aircraft for

22   the company.

23
                  116. In a February 9, 2009 memorandum to Pang, others on the PEMGroup
     Management Team and the other PEMGroup partners, PEMGroup's General Counsel
24
     acknowledged that the loans made to PEMGroup were improper:
25
                 I am of the opinion that many of the loans to the PEMGROUP
26               companies do not fall with the provisions of the CPOMS the basis
                 upon which the funds were provided by the investors and                                set out the
27               contractual obligations that the issuers and their agents and
                 subcontractors, namely our good selves, are subject. As a result if
28
                                                                           COMPLAINT
                                                                                - 36-                              DoC. #600752 v,2
      Case 2:10-cv-03669-GHK -E Document 1           Filed 05/14/10 Page 37 of 54



            there is a shortfall with respect to repayment of the Tranches to the
  1         investors and this shortfall is in any way impacted as a result of such
            loans the liabilty for that shortfall wil, I consider, fall upon you as the
 2          proprietors. The rationale being not only is there a clear breach of
            contractual obligations, but also a breach of the fiduciary duty owed to
 3          investors with regard to the management and investment of their funds.
 4                                 NONCONFORMING INVESTMENTS
 5           117. During 2007 and 2008, Pang and the PEMGroupManagement Team made
 6    the following nonconforming investments from offering proceeds into high risk and
 7    imprudent loans, equity investments, mezzanirie debt, real estate loans, undeveloped
 8    land in Costa Rica, investment into a Chinese company which owns coal mines, and
 9    investment into Chinese investment funds, which were never disclosed to the investors

10    and are not within the scope of conforming and permissible uses of the offering

11    proceeds described and set forth in the CPOMs:
                        a. On January 16,2007, Pang and the PEMGroup Management Team
12
            caused $1,200,000 of      funds from the GVEC Resource iv, Inc. 2006 D Tranche to
"13
            be loaned through a PEMGroup affiliate to an individual, secured by two 2,500
14
            sq. ft. industrial buildings located in Santa Ana, California.
15
                        b. On January 29, 2007, Pang and the PEMGroup Management Team
16
            caused $2,700,000 of GVEC Resource iv, Inc. 2006 D Tranche funds to be
17
            loaned through a PEMGroup affiiate to an entity, secured by 95.7 acres of land
18
            in Lake Elsinore, California. In 2008, the loan was extended and assigned to
19
            J orei Enterprises, LLC.
20
                        c. On March 8, 2007, Pang and the PEMGroup Management Team
21
            caused $2,100,000 of      funds from the GVEC Resource iv, Inc. 2006 C Tranche to
22          be loaned to an entity, and secured by a 2,700 sq. ft. front lot zoned commercial
23          and back lot residential in San Clemente, California.
24                      d. On April 20, 2007, Pang and the PEMGroup Management Team
25          caused $7,430,000 in funds from the GVEC Resource IV,Inc. 2006 C Tranche to
26          be loaned an entity to fund the design of a luxury ship with 200 private

27          residences and 265 suites for cruise passengers.
28
                                               COMPLAINT
                                                  - 37-                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                                     Filed 05/14/10 Page 38 of 54




 1                    e. On April 23, 2007, Pang and the PEMGroup Management Team

 2         caused the GVEC Resource iv, Inc. 2006 D Tranche to loan $305,000 of funds

 3         to an individual, and secured by a single family, 2,800 sq. ft. residence in
 4         Riverside, California.
                      f. On May 15, 2007, Pang and the PEMGroup Management Team
 5
           caused the GVEC Resource iv, Inc. 2006 C Tranche to loan $19,109,000 of
 6
           funds to an entity, to acquire parcels of land in Arizona, Florida and North
 7
           Carolina which were zoned for hotel development.
 8
                       g. On June 7, 2007, Pang and the PEMGroup Management Team
 9
           caused $1,650,000 of funds from the GVEC Resource III, Inc. A-4 Tranche to be
10
           loaned to an individual and secured                           by an office building built in 1954 located in
11
           Fresno, California.
12
                       h. On June 19, 2007, Pang and the PEMGroup Management Team
13
           caused the GVEC Resource III, Inc. A-4 Tranche to invest $2,650,000 in a
14         partnership interest in a private investment fund which acquired an interest in a
15         pink sheet company and oil and gas exploration and production services in Russia
16         and Kazakhstan and also received a Russian Angel note receivable.
17                     1. On July 18, 2007, Pang and the PEMGroup Management Team

18         caused GVEC Resource III, Inc. A-4 Tranche to invest $3 milion to acquire
19         common membership interests in a private company which had a clothing line
20         and a TV reality show for sports.

21                    J. On July 24, 2007, Pang and the PEMGroup Management Team

22         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
23
           and a one-story office building and shop building located in Taft, California.
24
                       k. On August 14,2007, Pang and the PEMGroup Management Team
25
           caused $6,500.000 of funds from the GVEC Resource iv, Inc. 2006 D Tranche to
26
           be loaned through a PEMGroup affiiate to an entity, and secured by 160 acres of
27
           land located in Nye County, Nevada.
28
                                                                   COMPLAINT
                                                                         - 38-                               DOC. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1        Filed 05/14/10 Page 39 of 54




 1                1. On August 22, 2007 and July 8, 2008, Pang and the PEMGroup

 2         Management Team caused the GVEC Resource iv, Inc. 2006 C and GVEC
 3         Resource iv, Inc. 2006 D Tranches to invest $11,800,000 in a company, which

 4         distributes building materials and tools and provides installation services to
           businesses and government.
 5
                  m. On September 7, 2007, Pang and the PEMGroup Management
 6
           Team caused $41 milion of funds from the GVEC Resource iv, Inc. 2006 A,
 7
           2006 C and 2006 D Tranches to be loaned to PEMGroup affiiate, GVEC
 8
           Acquisitions, Inc., which used the loan to acquire shares in Chipa Natural
 9
           Investment Holding Company, a Chinese company involved in acquiring,
10
           exploring and developing mining properties in China with a strong focus in coal,
11
           including five coal mines.
12
                  n. On November 30, 2007 and August 20, 2008, Pang and the
13
           PEMGroup Management Team caused the GVEC Resource iv, Inc. 2006 D
14         Tranche to loan $13,346,000 to a public company which designs, manufactures
15         and markets electronic devices and communications equipment for aerospace
16         defense, industrial and communications applications.
17                o. On December 14, 2007, Pang and the PEMGroup Management

18         Team caused the GVEC Resource II, Inc. 2007 C Tranche to invest $10 milion
19         in property on which a restaurant and boat slip are located in Newport Beach,
20         California.

21                p. On January 3, 2008, Pang and the PEMGroup Management Team

22         caused the GVEC Resource II, Inc. 2007 C Tranche to loan $4 milion, through a

23
           PEMGroup affiiate to an individual, and secured by a beach front single family
           residence in Laguna Beach, California.
24
                  q. On February 4, 2008, Pang and the PEMGroup Management Team
25
           caused the GVEC Resource II, Inc. 2007 E Tranche to loan $7,200,000 to an
26
           entity, a public company which was a specialty retailer of footwear and
27
           accessories for young women.
28
                                          COMPLAINT
                                              - 39-                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1               Filed 05/14/10 Page 40 of 54




 1                       r. On March 11, 12, Pang and the PEMGroup Management Team

 2         caused the GVEC Resource II, Inc. 2008 A Tranche to loan $11,350,000, through

 3         a PEMGroup affiiate, secured by a second Deed of Trust on a 16 story

 4         commercial and office building at 351 California Street in San Francisco,
           California.
 5
                         s. On July 14, 2008, Pang and the PEMGroup Management Team
 6
           caused the GVEC Resource II, Inc. 2007 E, 2008B, 20081 and 2007B Tranches
 7
           and Fides to provide $35,000,000, to a PEMGroup affiliate, to purchase the
 8
           senior Deed of Trust on the 16 story commercial and office building at 351
 9
           California Street in San Francisco, California.
10
                         1. On April 24, 2008, Pang and the PEMGroup Management Team
11
           caused the GVEC Resource II, Inc. 2007 D Tranche to loan $500,000 to an
12
           entity, a private global technology solutions provider of enterprise business
13
           intellgence.
14                       u. On April 29, 2008, Pang and the PEMGroup Management Team
15         caused the GVEC Resource II, Inc. 2008 B Tranche to loan $1,800,000, through
16         a PEMGroup affiiate, to an entity, and secured by property consisting
17         approximately 11.62 acres of land in Riverside, California.
18                       v. On May 22, 2008, Pang and the PEMGroup Management Team

19         caused the GVEC Resource II, Inc. 2008 B Tranche to loan $4,200,000, through
20         a PEMGroup affiliate, to an entity, secured by 66 acres of raw land zoned for
21         residential      located in Redlands, California.

22                       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
23
           funds from the aVEC Resource II, Inc. 2008 B, 2008 C and 2008 E, GVEC
24
           Resource II, Inc. 2007 C and GVEC Resource II, Inc. 2007 E Tranches to
25
           Zhongguo Investment Corporation, a PEMGroup affiiate and investment fund
26
           which invested in Chinese investments, including an equity investment in a solar
27
28
                                                 COMPLAINT
                                                     -40 -                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1           Filed 05/14/10 Page 41 of 54




 1         company, convertible debt investment in an iron or mining company, and wired
 2         money to two other development companies and paid management fees.

 3                x. On August 6 and October 7, 2008, Pang and the PEMGroup

 4         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
 5
           of 955 acres.
 6
                  y. On August 12,2008, Pang and the PEMGroup Management Team
 7
           caused the GVEC Resource II, Inc. 2007 E Tranche to loan $5 milion, through a
 8
           PEMGroup affiiate, to an entity, an investment company in Taiwan which
 9
           engages in the manufacture and sale of fiberglass yarns.
10
                  z. On August 29,2008, Pang and the PEMGroup Management Team
11
           caused the GVEC Resource II, Inc. 2008 A Tranche to loan $4,353,000, through
12
           a PEMGroup affiliate, to a mezzanine lender, secured by membership interests in
13
           the mezzanine lender. The mezzanine lender's loan was secured by unsold tenant
14         in common interests in the real property which consisted of retail commercial
15         buildings and a big block building.
16                aa. On September 26, 2008, Pang and the PEMGroup Management
17         Team caused the GVEC Resource II, Inc. 2007 E Tranche to invest $2,300,000 in
18         a partnership interest in a fund that invested in a public bank holding company
19         that provides financial products and services through offices in California and
20         Arizona.

21          1 i 8. The following wire instructions were sent to HSBC and demonstrate its

22   knowledge regarding the disbursement of the assets in its control:

23
     INSTRUCTIONS     INSTRUCTIONS      DATE       WIRE AMOUNT        BANK TO         WIRE
24        To              FROM                                        RECEIVE    RECIPIENT OR
                                                                       WIRE       SPECIFIED
25                                                                                  PUROSE
        HSBC            Pang, D.       4/20/07       $6,402,000.00    Bank of        Oceano
26                      Ouon. W.                                      Oklahoma       Escrow
        HSBC               Pang        4/20/07       $1,030,000.00    Bank of        Oceano
27                         Ouon                                     Oklahoma         Escrow
        HSBC            Quon, W.       6/11/07        $1,650,000.00 East West       Thomas
28                     Mendel P.                                      Bank         Savile Loan
                                            COMPLAINT
                                                 - 41 -                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1            Filed 05/14/10 Page 42 of 54



                                                                                  - Repayment
 1      HSBC        Quon, W.           6/11/07       $5,000,000.00 East West         Money
                    MendeL. P.                                       Bank         Market Fund
 2      HSBC        Quon, W.           6/18/07      $18,000,000.00 East West       Inter Travel
                     Pang, D.                                        Bank         and Services,
 3                                                                                     Inc.
        HSBC        Quon, W.           6/19/07       $2,650,000.00 East West       Russina
 4                  Pang, D.                                         Bank           Angel
                                                                                  Acquisition,
 5                                                                                   LLC
        HSBC        Quon, W.           7/18/07       $1,000,033.33  Bank of    Self Made
 6                  MendeL P.                                      America        Inc.
        HSBC        Quon, W.           7/18/07       $1,000,033.33  Bank of     Simply
 7                  MendeL. P.                                     America Believe, Inc.
        HSBC        Quon, W.           7/18/07       $1,000,033.33   Union    Miracle Man
 8                  Mendel, P.                                      Bank of Entertainment
                                                                   California
 9      HSBC                           7/18/07         $135,000.00 East West    Private
                    Quon, W.
                    Mendel, P.                                       Bank        Equity
10                                                                            Management
                                                                                 Group
11
        HSBC        Quon, W.           7/18/07         $365,000.00 Bank of TapouT, LLC
                    MendeL. P.                                      America
12                                                                             JFI-HDS,
        HSBC         Pang, D.          8120/07      $10,066,666.58 Citibank
                    Ouon. W.                                                      LLC
13
        HSBC         Pang, D.          10/16/07     $11,000,000.00 East West Inter Travel
14                  Quon, W.                                         Bank     and Services,
                                                                                        Inc.
15      HSBC        Mendel, P.         11/30/07      $1,926,773.53      Wells      Pasadena
                   Anderson, R.                                         Fargo     Office - Pay
16                                                                      Bank       off Emrise
        HSBC        Mendel, P.         11/30/07       $4,073,226.47     Wells     Remainder of
17                 Anderson, R.                                         Fargo     Term A Loan
                                                                         Bali       - Emrise
18                                                                                    Corp.
        HSBC         Daily,       1.   12/17/07     $10,000,000.00 East West         Nevada
19                 Knudson, W.                                       Bank            Capital
                                                                                    Holdings
20                                                                                  Partners
                                                                                    Property
21                            i                                                    Investment
        HSBC         Daily,       1.    2/4/08        $7,200,000.00     Bank of    Term Loan
22                 Knudson, W.                                      America          Bakers
                                                                      Retail        Footwear
23                                                                   Finance        Group Inc.
        HSBC         Daily,       1.    2/4/08          $300,000.00 East West       Closing Fee
24                 Knudson W.                                         Bank
        HSBC         Daily,       1.    8/6/08        $2,500,000.00 East West       Dominical
25                 Knudson. W.                                        Bank          Holdings
        HSBC         Daily, 1.          8/6/08        $2,500,000.00 East West       Dominical
26                 Knudson, W.                                        Bank          Holdings -
                                                                                      Loan
27                                                                                  Agreement
                                                                                    dated 8/6/08
28      HSBC         Daily,       1.   8/20/08            $286.660.61    Sun          Loan #
                                            COMPLAINT
                                                  - 42-                              Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1           Filed 05/14/10 Page 43 of 54



                    Knudson, W.                                        National    670600 -
 1                                                                      Bank        Payoff
        HSBC          Daily, 1.         8/20/08           $31,860.92     Sun       Retention
 2                  Knudson, W.                                        National    Bonuses
                                                                        Bank
 3      HSBC           Daily,      1.   8/20/08      $5,000,000.00     UBS AG     Charles and
                    Knudson, W.                                                   Peggy Brand
 4                                                                                  Emrise
        HSBC          Daily, 1.         8/20/08      $2,500,000.00 Wachovia       Charles and
 5                  Knudson, W.                                     Bank          Peggy Brand
                                                                                    Emrise
 6      HSBC              Daily,   1.   8/20/08      $2,257,439.21     Oppenhei    Charles S.
                    Knudson, W.                                          mer         Brand
 7                                                                      Funds,      Emrise
                                                                        United
 8                                                                     Missouri
                                                                         Bank
 9      HSBC              Daily,   1.   8/20/08      $1,219,679.90      Hudson     Joanne K.
                    Knudson, W.                                          City       Couse,
10                                                                      Savings   Thomas P.M.
                                                                         Bank        Couse
11                                                                                  Emrise
        HSBC          Daily, 1.         8/20/08      $1,219,679.90    Hudson       Michael L.
12                  Knudson, W.                                         City        Gaffney
                                                                       Savings      Emrise
13                                                                      Bank
        HSBC              Daily,   1.   8/20/08           $123,199.99 Wachovia       Emrise
14                  Knudson. W.                                         Bank
        HSBC              Daily,   1.   8/20/08            $21,750.00 Wachovia     Additional
15                                                                      Bank
                    Knudson, W.                                                     Deposit -
                                                                                   Change in
16                                                                                  Control
                      .
        HSBC              Daily,   1.   8/20/08           $339,808.92 East West   Advisory Fee
17                                                                                 and Legal
                    Knudson, W.                                         Bank
                                                                                     Fees
18
        HSBC              Daily, J.     10/7/08       $4,000,000.00 East West      Dominical
19                   Knudson, W.                                      Bank         Holdings -
                                                                                   additional
20                                                                                draw on loan
                                                                                   agreement
21
                                                                                   dated 8/6/08

22    PLAINTIFF'S DISCOVERY OF THE DEFENDANTS' TORTIOUS CONDUCT

23         119.   Commencing in 2003 and continuing through April 24, 2009, PEMGroup
24   and its affiliates were adversely dominated by the PEMGroup Management Team and
25   the PEMGroup Directors, who were responsible in whole or in part for the injuries to
26   PEMGroup and its affiliates. Specifically, all of the PEMGroup Directors adversely

27   dominated PEMGroup and its affiliates throughout their terms as PEMGroup Directors.

28
                                             COMPLAINT
                                                  - 43-                             Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1             Filed 05/14/10 Page 44 of 54




 1   No independent, disinterested Director was appointed or participated in the control of
 2   PEMGroup and its affiiates.

 3          120. On April     24, 2009 the United States Securities and Exchange Commission

 4   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
 5
     receiver to take control of the entities and their assets.
 6
            121. On April 27, 2009 the Court entered an order appointing Robert Mosier as
 7
     temporary receiver and on July 2, 2009 the Court entered an order permanently
 8
     appointing Robert Mosier as permanent receiver, vesting him with the authority set forth
 9
     in paragraph 4.
10
            122. Later, on July 2 and August 10, 2009 the Court entered supplemental
11
     orders placing additional affiiate entities under the authority of the receivership.
12
            123. Mr. Mosier and a team of accounting, legal and other professionals
13
     immediately began marshalling the assets of PEMGroup and its affiiates, reviewing and
14   studying the books and records of the entities, relevant transactions, corporate
15' 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.
28
                                               COMPLAINT
                                                   - 44-                              Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                            Filed 05/14/10 Page 45 of 54




 1          128. As a managing member of PEMG, LLC, Pang controlled and directed the
 2   actions and operations ofPEMG, LLC.

 3          129. As an officer, director and managing member of PEMGroup, Pang owed

 4   PEMGroup, the fiduciary duties of care, honesty, loyalty and full disclosure.

 5
            130. The PEMGroup Management Team, as officers and directors of
     PEMGroup, also owed PEMGroup the fiduciary duties of care, honesty, loyalty and full
 6
     disclosure.
 7
            131. Commencing in 2003 and continuing through March 2009, and as set forth
 8
     more fully above, Pang and the PEMGroup Management Team breached their duties of
 9
     care, honesty, loyalty and full disclosure by:
10
                   a. Distributing false and misleading NA V Reports to investors;
11
                   b. Improperly making interest payments with offering proceeds to
12
            earlier investors in PEMGroup and the Tranches;
13
                   c. Improperly purchasing impaired life insurance policies from earlier
14          SPY Tranches;
15                 d. Making loans from the Spy Tranches to PEMGroup to fund
16          PEMGroup's exorbitant operating expenses, including funding the establishment
17          of lavish office locations, purchasing corporate jets, and funding excessive travel
18          and entertainment expenses;
19                 e. Making unsecured and undocumented personal                          loans to Pang;

20                 f. Making unsecured and undocumented loans to entities controlled
21          by Pang;

22                 g. Misapplying and diverting the SPVs' funds into improper,

23
            unauthorized and imprudent loans and investments not in accordance with the
            uses of funds set forth in the CPOMs or the CPPOMs; and
24
                   h. Paying Pang and the Management Group excessive and unearned
25
            fees, bonuses, and commissions with the offering proceeds.
26
            132. HSBC knowingly and/or recklessly and substantially aided and abetted;
27
     assisted; encouraged; conspired with; authorized; and/or requested, commanded, ratified
28
                                                              COMPLAINT
                                                                   - 45-                            Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1            Filed 05/14/10 Page 46 of 54




 1   or recklessly tolerated the statements and actions of co-conspirators Pang and the
 2   PEMGroup Management Team by assisting Pang and the PEMGroup Management

 3   Team in issuing false and misleading NA V Reports, improperly wiring funds received

 4   from the investors to Pang and the PEMGroup Management Team, and improperly
     directing wire transfers of investor funds into unauthorized investments. These actions
 5
     aided and abetted Pang and the PEMGroup Management Team in breaching their
 6
     fiduciary duties of care, honesty, loyalty and full disclosure.
 7
            133. As a direct and proximate cause of the conduct of HSBC and its co-
 8
     conspirators Pang and the PEMGroup Management Team,PEMGroup has sustained
 9
     damages in an amount to be proven at trial including those damages described more
10
     fully above.
11
            134. PEMGroup is also entitled to disgorgement of the fees HSBC was paid as
12
     cash custodian.
13
                        COUNT II - AIDING AND ABETTING CONVERSION
14          135. Plaintiff    hereby incorporates by reference the proceeding paragraphs 1-134
15   as set forth herein.
16          136. As set forth fully above, Pang and the PEMGroup Management Team
17   solicited investors to invest in PEMGroup and the Tranches for the purpose of
18   purchasing specific assets, including life insurance and time-share related assets.
19          137. When PEMGroup received the offering proceeds on behalf of the SPVs

20   and Tranches, Pang and the PEMGroup Management Team converted the offering

21   proceeds and failed to use the offering proceeds as promised. More specifically Pang

22   and the PEMGroup Management Team used a substantial portion of the offering
     proceeds to:
23
                       a. Make interest payments to earlier investors in PEMGroup and the
24
            SPY Tranches;
25
                       b. To purchase impaired life Insurance policies from earlier Spy
26
            Tranches;
27
28
                                              COMPLAINT
                                                  -46 -                              Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1          Filed 05/14/10 Page 47 of 54




 1                     c. To make loans to PEMGroup to fund its exorbitant operating
 2         expenses, including funding the establishment of lavish office locations,
 3         purchasing corporate jets, and funding excessive travel and entertainment

 4         expenses;
                       d. To make unsecured and undocumented personal loans to Pang;
 5
                       e. To make unsecured and undocumented loans to entities controlled
 6
           by Pang;
 7
                       f. To misapply and divert the offering proceeds into improper,
 8
           unauthorized and imprudent loans and investments not in accordance with the
 9
           uses of funds set forth in the CPOMs or the CPPOMs ; and
10
                       g. To pay themselves excessive and unearned fees, bonuses, and
11
           commissions.
12
            138. By virtue of     the forgoing conduct, Pang and the PEMGroup Management
13
     Team have intentionally, unlawfully and wrongfully deprived PEMGroup and the SPY
14   Tranches it controlled of the funds to purchase the promised assets, thereby seriously
15   interfering with PEMGroup's and the Spy Tranches' abilty to pay their debts.
16          139. HSBC knowingly and/or recklessly and substantially aided and abetted;
17   assisted; encouraged; conspired with; authorized; and/or requested, commanded, ratified
18   or recklessly tolerated the statements and actions of co-conspirators Pang and the
19   PEMGroup Management Team by assisting Pang and the PEMGroup Management

20   Team in issuing false and misleading NA V Reports, improperly wiring funds received

21   from the investors to Pang and the PEMGroup Management Team, and improperly

22   directing wire transfers of investor funds into unauthorized investments. These actions
     allowed Pang and the PEMGroup Management Team to convert the funds that should
23
     have been used to purchase the promised assets set forth in the CPOMs or the CPPOMs.
24
            140. As a direct and proximate cause of the conduct of HSBC and its co-
25
     conspirators Pang and the Management Group, PEMGroup has sustained damages in an
26
     amount to be proven at trial including those damages described more fully above.
27
28
                                             COMPLAINT
                                                - 47-                               Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1           Filed 05/14/10 Page 48 of 54




 1                            COUNT III - GROSS NEGLIGENCE
 2          141. Plaintiff hereby incorporates by reference the proceeding paragraphs 1 - 140


 3   as set forth herein.

 4          142. HBSC prepared and distributed and allowed Pang and the PEMGroup
     Management Team to prepare and distribute false NA V Reports to PEMGroup's
 5
     investors using HBSC letterhead.
 6
            143. These false and misleading NA V Reports were meant to conceal the
 7
     improper and unauthorized diversions of funds.
 8
            144. The false and misleading NA V Reports did in fact conceal from the
 9
     investors the improper and unauthorized diversions of funds.
10
            145. As described more fully above, these offering proceeds were then looted
11
     and misappropriated by Pang and the PEMGroup Management Team, with the
12
     assistance of HSBC. More specifically, HSBC wire transferred these offering proceeds
13
     to Pang and the PEMGroup Management Team and wire transferred these funds into
14   unauthorized investments.
15          146. In preparing and distributing false NA V Reports, allowing Pang to prepare

16   and distribute false NA V Reports, and in improperly transferring the offering proceeds
17   to Pang, the PEMGroup Management Team, and to unauthorized investments, HSBC
18   acted with gross negligence, as evidenced by HSBC's want of even scant care and
19   extreme departure from the ordinary standard of conduct of an entity in its position.
20           147. As a direct and proximate result of HSBC's gross negligence, PEMGroup

21   was damaged in an amount to be proven at trial including those damages described more

22   fully above.
                              COUNT IV- CONSTRUCTIVE TRUST
23
             148. Plaintiff   hereby incorporates by reference the proceeding paragraphs 1-147
24
     as set forth herein.
25
             149. HSBC received cash custodian and other fees from PEMGroup totaling at
26
     least $1,874,000.
27
28
                                             COMPLAINT
                                                 - 48-                              Doc. #600752 v.2
     Case 2:10-cv-03669-GHK -E Document 1                                            Filed 05/14/10 Page 49 of 54




 1               150. As set forth above, HSBC wrongfully obtained those fees by representing
 2   that it would act as cash custodian for the proceeds of the offerings.

 3               151. Instead of fulfilling its duties as cash custodian, HSBC distributed false

 4   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
 5
     assets, and directed wires of investor funds to unauthorized investments.
 6
                 152. Thus, HSBC has wrongfully received and retained cash custodian fees
 7
     without performing its duties as cash custodian.
 8
                 153. By virtue ofHSBC's wrongful conduct, HSBC holds such fees, as well as
 9
     all profits of such fees, as constructive trustee for PEMGroup's and its affiiates' benefit
10
     pursuant to CaL. Civ Code § 2224.
11
                 154. Plaintiff alleges that the amount exceeds $1,874,000, plus interest thereon
12
     at the rate of 8% per annum or as allowed by law.
13
                 155. Plaintiff requests that the Court impose such constructive trust as
14   necessary to protect and preserve PEMGroup's and its affiliates' rights and interests,
15   and to return these fees to PEMGroup and its affiiates, the rightful owner of                                  the funds.

16                                                     JURY TRIAL DEMANDED
17               156. Pursuant to Fed. R. Civ. P. 38 and Fed. R. Civ. P. 81, Plaintiff                                Robert P.
18   Mosier, hereby demands a trial                         by jury on all issues so triable in this action.
19                                                         PRAYER FOR RELIEF
20                WHEREBY PLAINTIFF PRAYS FOR THE FOLLOWING RELIEF:
21
                 1. Compensatory damages in an amount to be proven at trial;
22
                 2.          A constructive trust for the benefit ofPEMGroup to be imposed upon the
23                           cash  custodian and other fees that HSBC has received from its wrongful
24                           acts;

25               3.          Disgorgement of all cash custodian and other fees paid to HSBC;
26
                 4.          All costs of the proceedings herein;
27
                 5.          Pre and post judgment interest; and
28
                                                                         COMPLAINT
                                                                               -49 -                                 Doc. #600752 v.2
      Case 2:10-cv-03669-GHK -E Document 1                 Filed 05/14/10 Page 50 of 54



            6.         Any other relief the court deems appropriate.
 1
                                    )~
                                  "')1 ,-
2           DATED this ~ day of             May, 2010.
 3
                                                          STEPTOE & JOHNSON LLP
4
 5

 6                                                        By: 1/1~ r
 7.                                                              Francis 1. Bi rke, Jr.
                                                                 Seong Kim
 8                                                        Attorneys for Plaintif
                                                          Robert P. Mosier
 9

10

11

12

13

14

15

16

17

18

19

20
21

22
23

24
25
26
27
28
                                                   COMPLAINT
                                                         - 50-                            Doc. #600752 v.2
        Case 2:10-cv-03669-GHK -E Document 1                                                     Filed 05/14/10 Page 51 of 54

                                         e                                                            e
  Steptoe & Johnson LLP
  Francis 1. Burke, Jr. (SBN 75970)                                   (' ' \ \
                                                              l- _" l - 1 l.,: r, \
                                                             l ; .' ".' l ¡ ,.... : : \ i .I ..'~ I
  Soong Kim (SBN 166604)                                     \ '¡" ., i' I \:. i . .._"
                                                              ....) i \ : \,~.~ ¡ i

  2121 Avenue of          the Stas, Ste. 2900
  Los Angeles, CA 90067-5052
  Telephone: 310-734-3200

                                                     UNITED STATES D~TICT COURT
                                                    CENTRAL DISTRCT OF CALIFORNIA
               PRIATE CAS~ V 10 36 ÓU
 ROBERTP. MOSIER, as                     Receiver    for

,EQUIY MAAGEMNT GROUP, INC. and.. 7 GHK IT:,,l
 PRl \ '(ATEd \QEQUIYliQ1ëLA(S)
 (\ l" d i:\i s U b~'i ri es Q ri ll'(¡
                                        MAAGEMNT GROUP LLC l.tr,
                                         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), you
must se.rve on the plaintiff an answer to the atached It complaint 0' amended              complaint
o counterclaim 0 cross.claim or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer
or motion must be served on the plaintiffs attorney, Fracis J. Burke, Jr. . whose address is
 Steptoe & Johnson, LLP, 2121 Avenue of
                                                                                              you fail to do so,
                                                            the Stas, -gte. 2800, Los Angeles, CA 90067 . If

judgment by default will be entered against you for the relief demanded in the complaint. You also must file
your answer or motion with the cour.


                                                                                         a~ U4sOct. C_

     Dated:
                             i 4 MAY 20m
                                                                                         Br- ~/U         Deput Clerk
                                                                                                                                 ~ )-k--2;
                                                                                                       (Sal of    the Court)



(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. Allowed
60 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 52 of 54
                                                                                                                                                                                    '.'-""',
1t.~-- -                                                                                                                                                                               "'f"'),
                                                                                                                                                                                           .I
                                                                                                                                                                                       . 5''' ~ ~


                                         UNITED STATE DISTRCT COURT, CENTR DISTlCT OF CALIFRN
                                                                                 CI COVER SHET

                Rober P. you ar recscillngyOUolf Cl DEFNDANTS NA
           I (II) PLANTIF (Chec box if
                          Mosier aSBe Bak USA,
                PriVale 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 Kim
               Stepto & Johon,21Z1 Avon!'e ofthc Sia SIc. 2800,L, Aigoles. CA
               9007-052
       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 DEY
                                              Ooveent No II Par)                                                                                                                     DRF
                                                                            Ciize ofTh St                                     01 01         Inoor or Pripal Place           r/4F'    04
                                                                                                                                            ofBiijieu in this Stle
       02 U.S. Oovenuent Oeendan          rJ4 Diverity (Indi~ Ciip          Ciizen of Anoter Sfa                              02 02         Incoi and Pricial Plac          OS       tis
                                               ofParcs in Iloi nl)                                                                          ofBiili~a bi Another St
                                                                            CIen 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 Distcl                                                                                                       o 7 App to Dlitrci
                                                                                                                                                                      Judge fmi
                                                                                                                                                      Utgaon          M.p$ Judge
       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.) ,
      0400 St Reoronmen i: 110 lmurc
                                                                                                    . . -, .        ,: ,                                    o 710..Fai LaSfada
      0410 Antitsl . i: 120 Mare                                       310 AIlan                                                    OSLO Moton to Act
                                                                                                   ill~~~~;~~ ~~:: 1~r!~~ Qt :~r ;~~~:¡;~
      0430 &n and Ba . 0 130 Miller Ac                               0315 AIlane Prollot           0370 er nw Vaoai Sentence lJ 720 LarlMgm
      o 4S0 ComißCC 0 140 Negoable IDstt                                    Llabilly               o;m Tr in Leding: Habea Corpus Relaton
          llcsolc. 0 iso Roovet ci
      o 460 D~itOl Overayt &.
                                                                     o 320 Aaaull, Libel &.
                                                                           Slllclcr
                                                                                                   ~ 380 Oter Poi 0 530 Gene 0 730 LarIgm
      CJ 470 Raeteer ùiUOed Enorcmen of                              ci 330 Fed. £lploy'                    Prer Da 0 53S DePenaty Reporg &:
                                                                                                   o 385 Prpert Da 0 540 MiIl/ DiclosUl Ao
              and Comipt IDdgnl                                             LlabUiI
                                                                     o 340 Ma~                         Produc Lift~ Otr 0 740 Ralway Lior Act
              Oranzaon Cl is 1 Medica Act                            o 3" Mi Prl                           Il~II .. _ 0 S50 Cill RighlB om Oter Lior
     0480 OinserCiI IS2 ReeiofDefaulfe                                                            o 422 Apoa2S use 0 SSS Pr Codlon LigaiOD
     Cl 4~0 Calelai TV Slt Lo (El.                                         Liability
                                                                                                    IS8 079 EnL.,Ret Inc.
     o 810 Sol~e Sorce Vet)
     o SSO Secuties/Coesl IJ LS3 Recver of
                                                                     o 350 Moto Vohiolo
                                                                     0355 Molor V.hlol.           042 Witwa28 S . Act,
              Exchae Ovymnt of                                             Prduct Liabilly                 use IS7 0610 Agicul
                                                                                                                                   0620 OtCl Food &
     0875 Customer CboUenge 12 Vct's Bets
              USC 3.$10 0 160 Stldei'SullS
                                                                      360 Olcr PClOlal
                                                                           Injui                   441 Voting Drg
                                                                                                  Cl 442 Em10)' 'i: 625 Drg Related
                                                                     0362 Pmo41 IAur.
     o 890 Oter Sllloi Aclor 0 190 Oter Co                                 Med Ma¡nct             o 443 HowlnAçe- SeÍ7 of
     0891 Agrcil Ac 019S Contra Prl1Q\                               o 365 Ponon IAury.                    mmodans Prer 21 use 0 861 IDA (1395f!
           Act 0 196 Ftso
     0892 lmnonc Stiliztion LiabiI
     i: 893 Enviroental Matl
                                                                           Prot Ljabilil          044, Welf 881 0862 Bla Lung (923)
                                                                     o 368 Alboto Peonftl Cl 44S Amrioan with 0 630 Liuor Lawi 0863 PIWCIIW
                                                                           Inju Pro1                  Disilites . Cl 64 R.R. &: Tnck (40'S(&)
     i: 894 Ener AI0c Act 0210 Lad Condemnll         Ll.b' .
     i: 89S Freedom oflno. Aci o 220 FORCI08                                                          Emloy (J 650 Ailine 1lgs 0 S64 ssm 'Ilc XVI
     0900 A¡l of Fee Det 23 Ront l. &. Ejectoir c: 462 NaIlitin                                   Cl 44 Ammc: with 0 66 occ 0865 RBI 40S
                                                                                                      Di$iiilillei - Saety /Health
             nallon Uncl Eq
             Aceu to IiiÎcc
                                     o 240 Tom to Lad Applioalin
                                     o 24S Tort Product Liabilit' 0 013 RabOl. Coi.
                                                                                                           Oter 0 690 Oter .                                o 870 Tax (U.S. Plaint
     Cl 950 Coiioiiity of
                                                                                                 o 44 Ot Civil                                                   atDefendat)
                                     o 290 An Oter Re Prert Alien Dell..                                   RighlS
             Stle Slatcs                                             o 46'S 0I llisnon                                                                      o 871 IRS-Th Par 26
                                                                          Aòtlon                                                                                 use 7609




     "''''''''''ONLV,c._ ~ . 3 of; 9
                           AF COMPLETING THE            FRONT SIE     OF FORM cr.71, COMPLETE THE INFRMTION REUESED BELOW.
    CV.71 (OSI08)
                                                                           CIV      COVER       SHT.                                                                        P/le 1 of2
                         Case 2:10-cv-03669-GHK -E Document 1                                                 Filed 05/14/10 Page 53 of 54
                                     UNITED STATES DISTRCT COURT, CENTRL DISTRICT OF CALIFORNIA
                                                                                   CIVIL COVER SHEET

VIII(a). IDENTICAL CASES: Has this action been previously fied in this court and dismissed, remanded or closed? rlNo DYes
If 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 "'Yes
If 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; or
                                  liE. Cali for determnation of  the same or substantially related or similar questions oflaw and fact; or
                                                                                                         heard
                                  ri C, For other reasons would entail substantial duplication of labor if      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                    other
                                                                                                                         this District; State, if      than California; or Foreign Country


                                                                                            NEW YORK


                                                              this Distrct; State if other than California; or Foreign Countr, in which EACH claim arose.
(c) List the County in this District; California County outside of
     Note: In land condenmation cases, use the location of the tract ofland involved.
  County in this District:.                                                                  California County outside ofthis   Distrct; State, if other than California; or Foreign Country


ORANGE




                                                                                  /'
· Los Angeles, Orange, San Bernardino, Riverside, Ventura, Santa Barbara, or San Lui Obispo Counties
Note: In land condemnation cases, use the 10'cation of    the tract ofland involved

X. SIGNATURE OF ATIORNEY (OR PRO PER):                         '7/J~~ ry~"41l                                            Date       l- ?tJ        lv, -zc/o
     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                pleadings
     or 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 filed
     but is used by the Clerk    ofthe Court for the purose of statistics, venue and initiating the civil docket sheet. (For more detailed instructions, see separate instrctions sheet.)


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 the
                                                                program, (42 U,S,C, 1935FF(b))


                862 BL                                          All claims for "Black Lung" benefits under Title 4, Par B, of

                                                                (30 U,S,C, 923)
                                                                                                                                  the Federal Coal Mine Health and Safety Act of 1969,


                863              DIWC                           All claim fied by insured workers for disability insurance benefits under Title 2 of the Social Security Act, as
                                                                amended; 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
                                                                Act, as amended. (42 U,S.C. 405(g))
                                                                                                                                                                       the Social Securty


                864              SSlD                           All claims for supplemental security income payments based upon disability fied under Title 16 of
                                                                Act, as amended,
                                                                                                                                                                           the Social Security


                865              RSI                            All claims for retirement (old age) and surivors benefits under Title 2 of the
                                                                U.S.C, (g))
                                                                                                                                                   Social Security Act, as amended. (42



CV-71 (05/08)                                                                      CIVIL COVER SHEET                                                                                  Page 20f2
Case 2:10-cv-03669-GHK -E Document 1                                      Filed 05/14/10 Page 54 of 54




                                       UNITED STATES DISTRICT COURT
                                    CENTRA 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 discovery
         Magistrate 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 related
   motions.



   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 is
filed, a copy of this notice must be served on all plaintiffs).

Subsequent documents must be filed at the following location:

(Xl Western Division
      312 N. Spring St., Rm. G-8
                                                    Southern St., Rm.1.053
                                                 LJ 411 West Fourth Division LJ                 Eastern Division
                                                                                                3470 Twelft St., Rm.134
      Los Angeles, CA 90012                             Santa Ana, CA 92701-4516                Riverside, 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

								
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