Former PinnFund CEO Sobs at Sentencing

Michael Fanghella receives 10-year sentence
By SAM GARCIA
2/6/2003

PinnFund U.S.A.'s former chief executive officer reportedly sobbed as he was sentenced for one of the biggest fraud cases in southern California history.

Michael J. Fanghella -- who last year pleaded guilty to being a coconspirator in a more than $300 million Ponzi scheme -- was sentenced to 10 years in federal prison, according to an announcement from the U.S. Attorney's office.

The government said Fanghella and his coconspirators raised more than $330 million from at least 166 investors in a sham that funded his exotic lifestyle amid losses at PinnFund. The Securities and Exchange Commission obtained a judgment against Fanghella for about $110 million.

The inspector general of the U.S. Department of Housing and Urban Development has said that the case represents "one of the largest investment fraud cases in Southern California."

Fanghella cried during the sentencing and stood with his head bowed as the judge imposed the penalty, the Associated Press (AP) reported.

In addition to operational losses, Fanghella spent more than $100 million on parties, call girls, alcohol, drugs, and gifts for a porn actress -- including a $5 million home. Some of PinnFund's executives allegedly helped Fanghella hide losses from investors by preparing and disseminating false financial statements.

As the scam began to unravel, Fanghella planned to escape to the Caribbean on $1 million yacht, but was stopped when his estranged wife found out and obtained an injunction preventing the yacht from sailing. Fanghella then disappeared until he surrendered in August 2001.

"You don't run from your problems," Fanghella was quoted by AP as saying upon his surrender.

In addition to 10 years in prison, Fanghella also was ordered to pay $234.3 million in restitution, the U.S. Attorney's office said.

At his sentencing, AP reported that the former fugitive said, "my very presence here today is about doing the right thing with honor, character, and integrity."

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