February 3, 2003

OFFICE OF THE UNITED STATES ATTORNEY
SOUTHERN DISTRICT OF CALIFORNIA
San Diego, California

United States Attorney
Carol C. Lam

For Immediate Release

NEWS RELEASE SUMMARY

United States Attorney Carol C. Lam announced that Michael J. Fanghella, former Chief Executive Officer of PinnFund, USA., Inc. was today sentenced by the Hon. Marilyn L. Huff to 120 months in custody for his central role in the perpetration of the PinnFund Ponzi scheme. He was also ordered to pay restitution in the amount of $234,251,066, less any amounts recovered by the government and the court-appointed receiver for the company. In March of 2002, the Defendant pled guilty to one count of conspiracy to commit wire fraud, one count of conspiracy to commit money laundering, three counts of tax evasion, and one count of filing a false statement with the Department of Housing and Urban Development. He also agreed to cooperate with authorities in the investigation and prosecution of other co-conspirators. The case was investigated by the Federal Bureau of Investigation, the Internal Revenue Service - Criminal Investigation, and the Department of Housing and Urban Development, Office of the Inspector General.

According to Assistant United States Attorneys Kevin J. Kelly and Sanjay Bhandari, who prosecuted the case, the defendant and his co-conspirators fraudulently attracted more than $330 million in investor funds to PinnFund, rendering it one of the largest fraud schemes in the history of the Southern District of California. Former PinnFund Chief Financial Officer John Garitta and former President Keith Grubba have also pled guilty to charges similar to those to which Fanghella pled guilty.

United States Attorney Carol C. Lam stated, "Fanghella's sentence is one more step in the long process of addressing the rampant criminality occurring at PinnFund. The United States Attorney's Office will continue to seek justice for employees and investors from what the Court described as the 'debacle' that was PinnFund."

Denise L. Rubin, IRS Criminal Investigation Special Agent in Charge for San Diego stated, "Fanghella was responsible for one of the largest investment fraud schemes in San Diego. His actions and personal greed led to the evasion of taxes and the failure of a corporation. The heightened awareness of corporate fraud in America has alerted the public to the ramifications of white-collar crime. Not only did the collapse of PinnFund leave investors with millions in losses, it also left PinnFund employees jobless and defrauded the American people of millions in tax dollars. IRS Criminal Investigation will continue to aggressively investigate corporate officers who are involved in financial crimes."

INVESTIGATING AGENCIES

Federal Bureau of Investigation
Internal Revenue Service - Criminal Investigation
Department of Housing and Urban Development, Office of the Inspector General