Monopoly Money

 

 

The final days of PinnFund’s business, mid-March 2001, had Fanghella still entangled with Mike Desai, the RINA accountant. Desai, realizing he’d been “victimized by Fanghella,” was in tears at his end of the fax machine. Nothing was working for Desai because Fanghella was subverting his strategy, namely, to get the eight mortgage purchasing companies to confirm the loans and the loan volume they were reviewing or buying at a given date from PinnFund. However, it is alleged that in days before the SEC arrived, Fanghella was in his office preparing these confirma­tion letters on his computer. First he created a set of boil­erplate letters with a space for the loan officer to sign. Each letter would confirm that the volume the com­pany was reviewing or pur­chasing was what it was sup­posed to be (what Fanghella wanted it to be) on December 31, 2000. Fanghella signed each letter with the loan offi­cer’s name (to date one has identified that his signature was forged). Nat, Fanghella scanned the letters into his computer and shrewdly made their origination look as though each letter had come from a different fax machine. Buzzing into Desai’s fax machine were, at long last, the letters that Desai had been waiting to receive—the correct ones—­for months.

 

 

But, because Fanghella was rushing to his limo ride to LAX and a flight to Bar­bados for what would be four months on the lam, he failed to clean off his desk, failed to shred a single doc­ument, failed to erase any-thing from the printer. Held in its memory was the crime, whose evidence was easily produced the next day when the investigators arrived and pressed print.

Meanwhile, in Oakland, Desai collected the eight let­ters and finished his audit, pronouncing to Hillman and the nervous investors that their money, all $330 million, was safe. It wasn’t until late April 2001 that the receiver discovered almost every penny was gone.

Michael Fanghella returned from Barbados in August 2001 and surren­dered to United States mar­shals; soon after, he was indicted by the U.S. Attor­ney’s office on 20 felony counts, including wire fraud and filing a false report with a government agency.

The how of Fanghella’s  deceptions may, at some point, be reckoned, but the why resists closure. I asked attorney Steve Owen to take a stab at dissecting Fanghella’s paradoxical character. Besides himself, Fanghella autho­rized others at PinnFund “to rip off the company,” Owen told me. “The peo­ple using the AmEx were doing it with Fanghella’s permission. But Fanghella .viewed the money as his money. What he meant by that is hard to say. It wasn’t somebody else’s money, it was the investors’ money. But in his mind, it was his money. He had set up this whole scheme. If he had robbed a bank, he might admit, ‘Yeah, it’s the bank’s money but it’s certainly not anybody else’s money’ On  that level he cared about it. On another level,” Owen continued, “ he knew it really wasn’t his rnoney so if a din­ner cost $15,000, and he leaves a $3000 or $4000 tip, what’s the difference? What does he care — it’s not his money. It was Monopoly money to him. But in his view, it was his Monopoly money.”

 

 

On March 22,2002, a year and a day after PinnFund was shut down, Michael Fanghella pled guilty to one count of filing a false report with the Department of Housing and Urban Development, three counts of tax evasion, and several counts of conspiracy to com­mit money laundering and wire fraud. The conspiracy charges state that he “did knowingly conspire and agree with others known and unknown to the United States Attorney” In return to his plea, Fanghella faces 11 to l4 years in prison. How­ever, if he cooperates with the U.S. Attorney's office and fingers both “known and unknown” cohorts before his mid-August sen­tencing date, he may get reduced time. The pressure is now on Peregrine and PirnnFund executives James Hillman; Keith Grubba, who is also being sued for $5 million; Tommy Larsen, who was head of PinnLease, a PinnFund subsidiary, and is also being sued for $6.7miIlion; and John Garitta,  whose deposition revealed much— perhaps too much for him — about how Fanghella and others ran the Ponzi. Audi­tors from the two San Diego and the two San Francisco accounting firms involved may be sued for negligence. Patrice Fanghella should receive some peace when her husband’s crimes are finally and filly exposed and their divorce, after his sentencing, becomes final.