online.wsj.comonline.wsj.com/public/resources/documents/hsbc_lawsuit0510.pdf · 5/14/2010 · hsbc...

---1 STEPTOE & JOHNSON LLP

FRACIS J. BUR, JR (SBN 75970)2 fburk~~oe.com

SEON KI (SBN~166604)3 skim0lsteptoe.com

2121 Avenue of the Stars, Suite 28004 Los Angeles, California. 90067-5052

Telephone: (310)' 734-32005 Facsimile: (310) 734-3300

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7UNITED STATES DISTRICT COURT'

CENTRA DISTRICT OF CALIFORNIA

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17 Plaintiff Robert P. Mosier alleges as follows:

18 INTRODUCTION

Plaintiff .

. caseNo.:l7CViO 3669 (¡k,

COMPLAINT tljury Trial Demanded

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VS.

HSBC BANK USA, N.A,

Defendant.

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20 Equity Management Group, Inc. ("PEMG, Inc."), a Nevada corporation with its

21 principal place of business in California and Private Equity Management Group, LLC

22 ("PEMG, LLC"), a Nevada limited liabilty company with its principal place of businessin California (collectively ~~PEMGroup") and their subsidiares and affiliates.

232. Defendat HSBC Ban USA, N.A. is a national association whose

24pricipal offce is in New York. HSBC acted as the Cash Custodian for PEMGroup's

25' affliates' proceeds of offerings.

263. Dany Pang (deceased) was the president and a director of PEMG, Inc.

27 Pang was also a managig member ofPEMG, LLC.28

1. Plaintiff Robert P. Mosier is a citizen of Cali fomi a and receiver for Private

COMPLAI

Doc. #600752 v.2

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

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

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

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

Virgin Islands which were affiliates of PEMGroup. Each SPY sold securities, and each

such offering was referred to as a "fund" or a "Tranche." These Spy funds or Tranches

were managed and controlled by Pang and the PEMGroup Management Team. They

raised $951 milion through a series of offerings, of which $823 milion remains

outstanding.

5. Commencing at least as early as July 2006, and continuing through at least

April 2009, Danny Pang and the PEMGroup Management Team formed and entered

into an unlawful conspiracy and agreement to loot PEMGroup and its affiiates by using

the proceeds of various offerings for a variety of ilicit and undisclosed purposes, which

included but were not limited to: (1) the purchase of impaired life insurance policies

from earlier Tranches; (2) milions of dollars in loans and excessive fees and

commission to PEMGroup to fund the company's exorbitant operating expenses, which

exceeded $100 milion; (3) milions of dollars in unsecured and undocumented personal

"loans" to Pang; (4) over $107 milion of excessive compensation, fees, commissions

and bonuses to Pang and the PEMGroup Management Team; and (5) hundreds of

milions of dollars of loans and investments in high risk nonconforming assets never

disclosed in the offering documents, most of which became substantially impaired.

None of these uses and/or misappropriations of funds were disclosed to the investors.

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

their debts.

6. As a further purpose of the conspiracy, Pang and the PEMGroup

Management Team, joined by HSBC, conspired and agreed to distribute false and

misleading Net Asset Value ("NA V") Reports to induce investors to maintain their

investments in the notes, bonds and other forms of debt offered by PEMGroup and the

Tranches, by lullng them into a false sense of security, and then to divert and

COMPLAINT

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misappropriate those funds for improper and unlawful purposes, and then to conceal the

diversion and misappropriation of the funds.

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

abetted; assisted; encouraged; conspired with; authorized, requested, commanded,

ratified or recklessly tolerated the statements and actions of co-conspirators Pang and

the PEMGroup Management Team by creating, and sending, false and misleading

documents, omitting and misstating material facts; and misrepresenting the status and

valuation of the assets of the Tranches. Overt acts in furtherance of the conspiracy are

alleged through this Complaint and continued through at least April 24, 2009.

JURISDICTION AND VENUE

8. This Court has jurisdiction over this action pursuant to 28 D.S.C. §§ 1332,

1348 because the amount in controversy exceeds $75,000 and there is complete

diversity of citizenship. Plaintiff Robert P. Mosier also has jurisdiction in this District

pursuant to D.S.C. § 754, which vests him "with complete jurisdiction and control of

all" property located in this District.

9. Venue is proper in this district pursuant to 28 D.S.C. § 1391 because

certain of the transactions, acts, practices and causes of conduct occurred within this

District and the Plaintiff Robert P. Mosier was appointed receiver in this district.

RECEIVER STANDING

10. Robert P. Mosier has standing to bring this action pursuant to 28 D.S.C. §

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

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

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

property with the right to take possession thereof. He shall have capacity to sue in any

district without ancilary appointment."

PARTIES

11. Robert P. Mosier was appointed as permanent receiver ofPEMG, Inc. and

PEMG, LLC, and their subsidiaries and affiiates, with full powers of an equity receiver,

including, but not limited to, full power over all funds, assets, collateral, premises

COMPLAINT

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(whether owned, leased, occupied, or otherwise controlled), choses in action, books,

records, papers and other real or personal propert, including notes, deeds of trust and

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

or control of PEMGroup, and their subsidiaries and affiliates.

12. Defendant HSBC Bank USA, N .A. ("HSBC") is a national association

with its principal office in New York. HSBC has over 470 bank branches throughout

the United States and is a member of the FDIC. HSBC provides commercial banking

services to its customers.

13. PEMG, Inc. offered and sold securities issued by various entities and

affiiates it controlled. PEMG, Inc. is a Nevada corporation located in Irvine, California.

Danny Pang ("Pang"), as its president and a director, controlled and directed the actions

and operations of this entity. PEMG, Inc purported to invest in life insurance policies

and interest in timeshare-related assets.

14. PEMG, LLC is a Nevada limited liability company located in Irvine,

California. Pang, as a managing member, controlled and directed the actions and

operations of this entity. PEMG, LLC took equity positions in certain investments made

by PEMG, Inc.

OTHER PERSONS

15. Danny Pang (deceased) resided in Newport Beach, California. Danny

Pang had effective control of and access to at least some of the bank accounts into which

investor funds were placed. Pang also controlled and directed the actions of Life

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

Holdings, Inc.

16. The PEMGroup Management Team consisted of panny Pang (Director,

Chairman, CEO), Leon Chan (Director, Co-President), Robert Anderson (Director, Co-

President), Nasar Aboubakare (Director, Former Vice President), Steven Blair (General

Counsel), Todd Gilespie (Managing Director), Wilbur Quon (Director, CFO), Peter

Paul Mendel (Director, Chief Compliance Officer, Former General Counsel), Anthony

Bufinsky (Managing Director), Sandra Chang (Managing Director), Andrew Shayne

COMPLAINT

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COMPLAINT

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1. GVECR Dl Notes, November 15,2005, $1,000,000, lIT;

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

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

o. GVECR E2 Notes, November 15,2005, $2,472,500, lIT;

p. GVECR B Notes, January 2,2006, $5,000,000, Coretech;

a. GVECR PI Notes, March 21, 2006, $4,500,000, TruswellSecurities Investment Trust;

r. GVECR IV Notes A, July 26, 2006, $75,120,000, Standard

Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank;

s. GVEC II CDO Series 2006, August 1, 2006, $32,000,000, Bank

SinoPac;

t. GVEC II Debentures Series 2006-A, October 10, 2006,$55,000,000, Bank SinoPac;

u. GVECR IV Notes C, December 7, 2006, $100,050,000, Standard


v. GVECR IV Notes D, December 28, 2006, $79,960,000, Standard


w. GVECR II Debentures Series 2006-A-l, January 1, 2007,

$5,000,000, Hua Nan Investment Trust Corporation;

x. GVECR II Debentures Series 2006-A-2, January 1, 2007,


y. GVECR II Debentures Series 2006-A-3, January 1, 2007,


z. GVECR II Debentures Series 2006-A-4, January 1, 2007,


aa. GVECR II Debentures Series 2006-A-5, January 1, 2007,


bb. GVECR III Notes - Series 2007 A-4, April 2, 2007, $16,870,000,

Cosmos Bank, Entie Bank;

COMPLAINT

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cc. GVECR II Debentures Series 2007 A, May 9, 2007, $12,560,000,

Hua Nan Commercial Bank Ltd. Trust Dept.;

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

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

ee. GVECR II Debentures Series 2007 C, September 3, 2007,

$115,840,000, Cosmos Bank, Entie Bank, Hua Nan Commercial Bank Ltd. Trust

Dept. ;

ff. GVECR II Debentures Series 2007 D, November 1, 2007,

$15,550,000, Cosmos Bank, Entie Bank;

gg. GVECR II Debentures Series 2007 E, December 17, 2007,

$56,350,000, Cosmos Bank, Hua Nan Commercial Bank Ltd. Trust Dept.;

hh. GVECR II Debentures Series 2008 B, February 4, 2008,

$45,170,000, Hua Nan Commercial Bank Ltd. Trust Dept.;

11. GVECR II Debentures Series 2008 C, February 4, 2008,

$11,900,000, Cosmos Bank, Hua Nan Commercial Bank Ltd. Trust Dept.;

JJ. GVECR II Debentures Series 2008 AI, March 7, 2008, $6,000,000,

Hua Nan Investment Trust Corporation;

kk. GVECR II Debentures Series 2008 A2, March 7, 2008,


n. GVECR II Debentures Series 2008 A3, March 7,2008, $6,000,000,


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


nn. GVECR II Debentures Series 2008 A5, March 7, 2008, $6,616,225,


00. GVECR II Debentures Series 2008 E, April 30, 2008, $33,341,000,

Entie Bank, Taichung Bank;

pp. GVECR II Debentures Series 2008 G, May 30,2008, $18,860,000,

Entie Bank, Taichung Bank;

COMPLAINT

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qq. GVECR II Debentures Series 2008 I, July 2, 2008, $14,533,000,

Taichung Bank;

IT. GVECR II Debentures Series 2008 H-6, July 31, 2008,

$12,380,000, Taichung Bank;

ss. GVECR II Debentures Series 2008 H-7, July 31, 2008, $8,500,000,

Coretech; and

tt. GVECR II Debentures Series 2008 J, September 3, 2008,

$15,621,000, Taichung Bank.

19. PEMGroup subsidiaries and affiliates include GVEC Resource, Inc.;

GVEC Resource II, Inc.; GVEC Resource III, Inc.; GVEC Resource IV, Inc.; GVEC

Resource V, Inc.; GVEC Resource VI, Inc.; GVEC Acquisitions, Inc.; Genesis Voyager

Equity II Corporation; Genesis Voyager Assets Management; Genesis Voyager Equity

Corporate Resources I, Inc.; GVEC Investments Corporation; Epoch Investment

Holding Corporation; Fides Insurance Company, Ltd.; Irvine Insurance Company (BVI),

Ltd.; Equity Resource Management (BVI), Ltd.; ERM Resource, Ltd.; Dominical

Holdings, LLC; Jorei Enterprises, LLC; Irvine Capital Holdings, LLC; and Zhongguo

Investments Corporation.

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18 THE OFFERINGS19 20. Since at least 2003 and continuing through September 2008, Pang, the

20 PEMGroup Management Team and the Tranches offered and sold preferred shares,

21 notes and bonds and other forms of debt and purported to use the proceeds to purchase

22 and/or finance the maintenance of, life insurance policies issued to high net worth

23 individuals, and/or to invest in timeshare related assets and potentially other assets.

24 Pang, the PEMGroup Management Team and the Tranches offered and sold securities

25 promising rates of return between 5.25% to 7.55%, paid semi-annually. The offerings

26 for 2003 through July 2005 included preferred shares, while the offerings fromNovember 2005 through September 2008 were exclusively debt offerings including

27notes, bonds and other forms of debt.

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THE FRAUDULENT SCHEME

COMPLAINT

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

and the PEMGroup Management Team prepared and delivered to investors Confidential

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

Offering Memoranda ("CPOMs") that, among other things, represented to investors how

their funds would be used.

22. Between 2004 and 2005, Pang and the PEMGroup Management Team

conducted several offerings to raise money for an Spy called Genesis Voyager Equity

Corporation ("GVEC"), which is a business company incorporated in the British Virgin

Islands. The GVEC offerings were conducted in six Tranches. The funds raised in the

six GVEC offerings were used to purchase life insurance policies. In return for their

investments in the GVEC offerings, investors were promised annual interest payments

of between approximately 6% and 7.1 %, which were payable semiannually, as well as

the return of their principal upon maturity.

23. Between January 2006 and December 2006, Pang and the PEMGroup

Management Team conducted several debt offerings to raise money for an Spy called

GVEC Resource IV Inc. (GVECR IV"). The GVECR IV offerings were conducted in

three Tranches: (1) GVECR IV Notes A; (2) GVECR IV Notes 2006 C; and (3)

GVECR IV Notes 2006 D. The proceeds raised in the GVECR IV debt offerings were

primarily intended for investments in timeshare-related assets and other infrastructure

assets.

24. The GVECR IV A, C and D debt offerings consisted of 48 month notes at

6% interest. Interest was payable semi-annually with principal repayment at the

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

that the net proceeds from the sale of the notes would be used by the issuer to acquire a

portfolio of various infrastructure assets and time share assets and receivables. These

"Underlying Assets" were to be pledged to secure the notes. The issuer was to grant to

the trustee for the benefit of the note holders a first priority security interest in the

Underlying Assets to secure the issuer's obligations under the notes. The CPOMs stated

the noteholders would be provided with annual portfolio reports about the assets and the

COMPLAINT

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receivables purchased from the proceeds of the offering by March 1 of each year. These

CPOMs stated that HSBC as cash custodian would hold the invested capital and assets

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

further stated that the Underlying Assets would consist of a segregated portfolio of

various infrastructure and time share assets and receivables and that they would be held

in trust.

25. Specifically, in the CPPOMS and/or CPOMs for the GVECR iv Notes A,

GVECR iv Notes 2006 C, and GVECR iv Notes 2006 D offerings, the following

language appears under the "Security for the Notes" section: "The Underlying Assets

consist of 'Asset Backed Securities. ", Later the following language appears under the

"Description of the Underlying Assets" heading:

The net proceeds received by the Issuer from the issuance and thesale of the Notes wil be used to purchase the Underlying Assets, whichinclude without limitation: senior acquisition and development loans;subordinated acquisition and development loans; timeshare receivableloans; management fee receivable loans; and community fee receivableloans.

The assets to which the Issuer wil allocate include the followingcharacteristics:

A term no longer than the term of the Offering (48 months).

****

The asset types under consideration wil include:

1. Secured loans for acquisition and development. Aperformance assurance rated not less than A by A.M. Best oranother rating agency for senior loans may be required.

2. Tranches of timeshare-related securitizations, rated A orbetter.

3. Secured residential bridge mortgages. A performanceassurance rated not less than A oy A.M. Best or anotherrating agency for senior loans may be required.

4. Mortgage loans for acquisition and development. Theseassets require a performance assurance ratea not less thanA by A.M. Best or another rating agency.

5. Preferred return investments in timeshare-related limitedpartnerships, LLCs or other entities with performanceassurances rated not less than A by A.M. Best or another

COMPLAINT

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rating agency.

6. Preferred return investments in timeshare receivables withperformance assurances, rated not less than A by A.M.Best or another rating agency.

Timeshare Industry Description

Vacation ownership is a concept that originated in the FrenchAlps in the 1960's. Now, 40 years later, it is firmly positioned as one ofthe most popular vacation options enjoyed by today's leisure travelers.Consumers are embracing timesharng, maKg it one of the fastest-growing sectors of

the worldwide hospitality industry. In fact, vacationownership has enjoyed a double-digit annual growth rate over the pasttwo decaaes. With vacation ownershil?~ consumers have the opportityto purchase time at quality resorts oftering an array of amenities inpopular international destinations.

There are now more than 5400 resorts in some 100 countriesaround the world and annual vacations ownership sales are estimatedto be in excess of $9.4 bilion. Today 3 milion U.S. households own4.9 milion weeks at nearly 1600 resorts. The average number ofweeks owned per household has increased from 1.5 to 1.8 amongthose who first bought more than 12 years ago. Over 500,000 U.S.timeshare owners would like to buy more time during the next threeyears in a resort area where they already own, and more than 650,000want to buy in another resort area.

The traditional interval week program offers owners the use oftheir accommodations for one week - either for a specific week duringthe year or for a week during a time period or season. During the pastseveral years, consumers have sougfit enhanced flexibility, which hasfueled today's multiple use options. Vacation clubs give membersaccess to resorts within a resort group, under a variety of differentplans. In point-based programs, owners purchase points that can beredeemed for access to various types of accommodations, resortlocations, amenities, number of days use and other travel services.Point-based programs appeal to owners because they provide theflexibility to design their own vacations.

With vacation ownership, consumers make a one-timepurchase of furnished resort accommodations, as a fraction of wholeownership costs, and Fay an annual maintenance fee. Eachcondominium, or unit, 0 a vacation ownership resort is divided intointervals, either by the week or points equivalent, which are soldseparately. The accommodations are priced according to a variety offactors, ,including size of the unit, resort amenities, location, andseason. The purchaser owns the vacation accommodatións, but onlyfor the amount of time he or she plans to use it, typically one or twoweeks each year. With timeshare, the owner has all the benefits of avacation home without the year-round costs. From its origin, the ideabehind timesharing was to give people the abilty to purchase theirfuture vacations - at current prices.

Timeshare programs and their related financing opportnitiesare becoming a strong asset class in investment portfolios. A subset ofthe hospitality and real estate, it has fewer operating risks than hotels,and its returns on equity are driven by sales of fractional or vacationownership interests as opposed to returns on equity driven by

COMPLAINT

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refinancing or total sale of hotel properties on a stabilzed basis.

26. The CPPOMS and CPOMS associated with the GVECR iv Notes A,

GVECR iv Notes 2006 C, and GVECR iv Notes 2006 D offerings were delivered to

Standard Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank in

or around July 2006, November 2006 and December 2006, respectively.

27. Finally, under a section labeled "Assurance and the Assuror," the

following language appears:

"Assurance. Payout of principal of and interest on the Notesmay be assured pursuant to an Assurance (the "Assurance") issued byHannover Re, a bank, a financial institution, or other entity whosegeneral unsecured obligations are rated not less than "A" by A.M.Best Issuer, Inc.; Standard & Poor's, a division of the McGraw-HilCompanies, Inc.; Moody's Investor Service, Inc.; Fitch, Inc. or asimilar rating agency."

A different Assuror was identified for each offering: Hannover Re for Notes A,

HCC Reinsurance, Ltd. for Notes C, and Swiss Re, CIFG or HCC for Notes D.

28. In August 2006, Pang and the PEMGroup Management Team conducted a

debt offering to raise money for an Spy called GVEC II CDO Series 2006. According

to the applicable CPOM, the proceeds from the GVEC II CDO Series 2006 were

primarily intended for, and were represented to investors as, investments in timeshare-

related assets. The language was similar to the language in the GVECR iv offerings. A

different Assuror, Hannover Rueckversicherung, AG, was identified. Bank SinoPac was

the only investor in this offering.

29. In October 2006, Pang and the PEMGroup Management Team conducted

a debt offering to raise money for an Spy called GVEC II Debentures Series 2006-A.

According to the applicable CPOM, the proceeds of the GVEC II Debentures Series

2006-A were primarily intended for, and were represented to investors as, investments

in life insurance related assets. The CPOM represented that the company would acquire

a contestability period insurance policy and a residual value insurance policy to protect

against loss. Bank SinoPac was the only investor in this offering.

26 30. Between December 2006 and September 2008, Pang and the PEMGroup

27 Management Team conducted several debt offerings to raise money for an Spy called

28 GVEC Resource II Inc. ("GVECR II"). The GVECR II offerings were conducted inCOMPLAINT

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approximately 23 Tranches: (1) Series 2006 A-I; (2) Series 2006 A-2; (3) Series 2006

A-3; (4) Series 2006 A-4; (5) Series 2006 A-5; (6) Series 2007 A; (7) Series 2007 B; (8)

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

2008 A2; (13) Series 2008 A3; (14) Series 2008 A4; (15) Series 2008 A5; (16) Series

2008 B; (17) Series 2008 C; (18) Series 2008 E; (19) Series 2008 G; (20) Series 2008 H-

6; (21) Series 2008 H-7; (22) Series 2008 I; and (23) Series 2008 J.

31. The CPPOMs and CPOMs associated with all of the GVECR II offerings

represented that proceeds would be used primarily to purchase life insurance related

assets plus other assets to assure the stated rates, and were delivered to Hua Nan Bank

and Cosmos Bank, Taichung Bank, Coretech, and Entie, who were the five principal

investors in the GVECR II Spy s. Some of the CPPOMs and CPOMs stated that the

Issuer would purchase contestabilty period insurance and residual value insurance while

others indicated that the portfolio would be secured by an insurance or reinsurance.

32. The GVECR II debt offerings consisted of 30, 36 and 48 month

debentures paying varying rates of interest. Interest was payable quarterly and principal

was payable at maturity. The CPOMs stated that the proceeds of the offering would be

used to purchase term, non-recourse, premium finance loans for the purchase of and

secured by a senior interest in newly issued life insurance policies insuring high net

worth individuals over of the age of 70, plus other assets to assure at the Debenture

Holders return of stated principal plus the stated annual return. The CPOMs stated that

the underlying assets of the debentures would be held by a trustee in segregated

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

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

satisfaction of the premium finance loans. The CPOMs stated that HSBC would serve

as cash custodian and LaSalle Bank would serve as asset custodian and that the co-

custodians would hold the invested capital and assets acquired with the proceeds of the

offering, the interest reserves and proceeds of the investments.

33. For instance, the following language appears In the CPPOMs and/or

CPOMs for the GVECR II 2007 C, GVECR II 2008 Al and GVECR II 2008 G

COMPLAINT

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offerings (which were delivered to investors on or around September 3,2007, January 1,

2008 and May 1,2008, respectively) under the "USE OF PROCEEDS" heading:

The Issuer intends to use the Offering proceeds to engage in premiumfinance transactions, with the balance of proceeds used to pay (a) acquisition,servicing trustee, custodian and originatlOn fees, (b) management fees to theManager, advisory fees to the Advisor, and (c) administrative fees andexpenses associated with this Offering.

The Issuer wil use the proceeds from the Offering to acquire assets (the "Assets")consisting of:

. a portfolio of recourse and non-recourse premium finance loans

(the "Loans") for the purchase of, and secured by a senior securityinterest in, newly-issued, non-variable life insurance policies (the"Policies" insuring high-net-worth individuals over the age of 70(the "Seniors');

. beneficial interest in a structured irrevocable life insurance trust (an

"ILIT") that contains Policies;

. Policies acquired by the Issuer as a result of borrowers' Loandefaults, voluntary relinquishment of Policies by borrowers to theIssuer in satisfaction of the Loans or through the secondary market;and

. a twenty-four (24) month interest reserve.

The Issuer intends to acquire adequate Assets within three (3) monthsof the Issuance Date to secure periodic interest payments and repayment ofprincipal to Debenture Holders at the Maturity Date. The Assets underlyingthe Debentues wil be held by a trustee in one or more segregated custodialaccounts with the Issuer as beneficiar. The Issuer intends to commenceliquidation of adequate Assets not less than three (3) months prior to theMaturity Date to ensure payment of all principal and accrued but unpaidinterest at the Maturity Date.

34. In April 2007, Pang and the PEMGroup Management Team conducted a

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

("GVECR III"). The GVECR III debt offering consisted of 48 month notes at 6%

interest. The interest was payable semi-annually with the principal due upon maturity of

the notes. The notes were described as "asset backed securities." The CPOM stated that

the net proceeds from the sale of the notes would be used by the issuer to acquire a

portfolio of various infrastructure and time share assets and receivables. The

Underlying Asset language was similar to that used in the GVECR IV offerings, as was

the "Assurance and Assuror" language, although different Assurors, Swiss Re,

COMPLAINT

- 14- DOC. #600752 v.2


1 Hannover Re, or HCC Re, were identified. The CPOM stated that the assets of the

2 issuer that would be pledged to secure the notes would be held in a segregated portfolio.

3 It stated that the notes would be secured by the Underlying Assets and that the issuer

4 would grant to the trustee for the benefit of the noteholders a first lien security interest in

5 the Underlying Assets. It stated that the noteholders would be provided with annual

6 portfolio reports of the assets and receivables purchased with the proceeds of the

offering by March 1 of each year. It stated that HSBC as cash custodian would hold the

invested capital and assets acquired with the proceeds of the offering.

MISUSE. DIVERSION AND MISAPPLICATION OF FUNDS

35. As early as July 2006, despite having raised over $75 milion from

Standard Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank

based upon representations that such funds would be loaned or invested in timeshare and

infrastructure assets, Pang and the PEMGroup Management Team could not identify

more than $30 milion in conforming investments, due in part to the fact that PEMGroup

was engaged in a dispute and/or litigation with Shell Vacations, which is the timeshare

company in which the Tranches had previously invested.

36. Because Pang and the PEMGroup Management Team had largely failed to

effectuate the timeshare deals that were described in CPOMs provided to Standard

Chartered Bank Taiwan Ltd. formerly known as Hsinchu International Bank in

connection with its investments in the GVECR IV Notes A, Notes 2006 C and Notes

2006 D SPY s, the bulk of Standard Chartered Bank Taiwan Ltd. formerly known as

Hsinchu International Bank's $220 milion investment became a "slush fund" from

which Pang and the PEMGroup Management Team misdirected and misappropriated

milions of dollars.

37. Contrary to the explicit language in the CPPOMs and/or CPOMs regarding

use of offering proceeds, starting at least as early as July 2006, Pang and the PEMGroup

Management Team actually used the proceeds of various offerings for a variety of ilicit

and undisclosed purposes, which included but were not limited to: (1) the purchase of

impaired life insurance policies from earlier Tranches; (2) milions of dollars in loans to

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- 15 - Doc. #600752 v.2


1 PEMGroup to fund the company's exorbitant operating expenses; (3) milions of dollars

2 in unsecured and undocumented personal "loans" to Pang; (4) milions of dollars of

3 excessive compensation, fees, commissions and bonuses to Pang and the PEMGroup

4 Management Team; and (5) hundreds of milions of dollars of loans and investments in

5 high risk nonconforming assets never disclosed in the CPPOMs and CPOMs. None of

6 these uses and/or misappropriations of funds were disclosed to the investors.

THE SPVS AND PEMGROUP ARE LIABLE TO INVESTORS ON7

PROMISSORY NOTES8

38. PEMGroup and the SPVs, GVEC, GVECII, GVECR II GVECR III and9

GVEC iv, which were owned and controlled by PEMGroup affiliates and were10

ultimately controlled by Pang and the PEMGroup Management Team, are liable to the11

various Tranche investors on the $823 milion of remaining promissory notes,

12debentures and bonds they offered and sold.

13 ALLEGATIONS RE EXCESSIVE COMPENSATION AND COMMISSIONS

14 39. Pang and the PEMGroup Management Team looted PEMGroup and the

15 Spy s and their Tranches by paying lavish and excessive compensation, fees, bonuses,

16 and commissions to themselves either directly or by indirectly diverting such funds to

17 themselves. These payments benefited Pang and the PEMGroup Management Team

18 and injured PEMGroup and the Spy s, rendering them unable to pay their debts. From

19 2004 ethrough 2009, the PEMGroup Management Team was paid $107,385,038 in

20 compensation, fees, commissions and bonuses, as follows: Danny Pang, $57,699,740;

21 Bob Anderson $3,568,092, Nasar Aboubakare, $9,459,683; Steven Blair $2,126,004;

22 Todd Gilespie, $7,097,177; Wil Quon, $6,448,329; Peter Paul Mendel, $1,585,519;Anthony Bufinsky, $1,298,049; Sandra Chang, $1,382,134; Andrew Shayne and Eric

Sloane, $2,433,652; Leon Chan, $13,890,642; and Bob Van Duren, $396,016.

40. In addition, the following persons received up front start up Tranche fees

as follows: Danny Pang, $11,733,541; Leon Chan, $12,680,666; and Rick Chen and

James Yen, $1,302,500.

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28COMPLAINT

- 16- Doc. #600752 v.2


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ALLEGATIONS RE EXCESSIVE CORPORATE EXPENSES

41. Pang and the PEMGroup Management Team looted PEMGroup and the

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

including multiple lavish office locations, corporate jets, and travel and entertainment.

These payments benefited Pang and the PEMGroup Management Team by enabling

them to project a false veneer of success and profitability, enabling them to raise further

funds from investors, and injured PEMGroup and the SPY s, rendering them unable to

pay their debts. These corporate expense payments exceeded $100 milion.

MISAPPLICATION AND CONVERSION OF ASSETS INTO

NONCONFORMING INVESTMENTS

42. Pang and the PEMGroup Management Team looted PEMGroup and the

SPY s and their Tranches by diverting and misapplying Spy Tranche and PEMGroup

funds into high risk and imprudent loans, equity investments, mezzanine debt, real estate

loans, Chinese coal mines, undeveloped land in Costa Rica, and investment in Chinese

investment funds, in many cases accompanied by payment of fees, bonuses, and

commissions to themselves either directly or by indirectly diverting such funds to

themselves. These loans and investments benefited Pang. and the PEMGroup

Management Team and injuredPEMGroup and the SPY s, rendering them unable to pay

their debts.

43. Many of the loans from the Tranches were placed in lrigh risk hard money

loans, where the borrowers did not qualify for traditional bank financing. The rates on

such loans were higher than traditional bank loans, the term of the loans was short and

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

Jorei Enterprises, Ltd. ("Jorei"), a California based hard money lender, and advanced

moneyfrom the Tranches to Jorei which made hard money loans to borrowers, and Jorei

gave a promissory note to the Tranches.

COMPLAINT

- 17- Doc. #600752 v.2


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MANY OF THE NONCONFORMING INVESTMENTS ARE IMPAIRßD.

CAUSING LOSS TO THE SPVS AND PEMGROUP

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

debt, real estate loans, coal mines, undeveloped land in Costa Rica, and investment fund

investments are impaired in that their value is substantially lower than the original

investment, rendering PEMGroup and the SPVs unable to pay their debts. Pang and the

PEMGroup Management Team invested over $225 milion into such unauthorized assets

which are substantially impaired. The impaired status of the assets injures PEMGroup

and the SPY s, rendering them unable to pay their debts.

45. As described above, all of the CPOMs for SPY Tranche offerings

described in this Complaint stated that an Assurance or reinsurance or contestability

period insurance policy or residual value insurance policy would be purchased to protect

against loss and assure the return of principal plus the stated annual return. However

Pang and the PEMGroup Management Team purchased a grossly inadequate amount of

such insurance, most of which was placed during the relevant time period with two

captive carriers, Fides Insurance Company, Ltd., and Irvine Insurance Company, Ltd.,

which were responsible for the first 10% of any loss. They did purchase some

reinsurance, but in a grossly inadequate amount, leaving most of the investments

unprotected against loss.

CONSPIRACY AND AIDING AND ABETTING REGARDING

NET ASSET VALUE REPORTS

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

conspiracy to distribute false and misleading Net Asset Value ("NA V") Reports to

induce investors to maintain their' investments in notes, bonds and other forms of debt

offered by PEMGroup and the Tranches, by lullng them into a false sense of security,

and then to divert and misappropriate those funds for improper and unlawful purposes,

and then to conceal the diversion and misappropriation of the funds.

47. HSBC, Pang and the PEMGroup Management Team acted in concert in

furtherance of this conspiracy by distributing such false and misleading NA V Reports to

COMPLAINT

- 18 - Doc. #600752 v.2


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investors, directing funds received from the investors to go to Pang and the PEMGroup

Management Team instead of to purchase the promised assets, and directing wires of

investor funds to unauthorized investments.

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

abetted; assisted; encouraged; conspired with; authorized, requested, commanded,

ratified or recklessly tolerated the statements and actions of co-conspirators Pang and

the PEMGroup Management Team in order to further the scheme to defraud PEMGroup

and the Tranches; make false representations; omit or misstate material facts;

misrepresent the status of the Tranches; and create send, and fie false and misleading

documents.

KNOWLEDGE OF HSBC

49. HSBC acted as the Cash Custodian for the Tranches and SPY s.

50. HSBC, as Cash Custodian had a duty to hold and maintain the funds and

assets the Tranches and Spy s acquired, pursuant to the terms of the CPPOMs and

CPOMs. The specified uses of the funds, and the details regarding the handling of the

invested capital and assets acquired with the proceeds of the offerings, and the' reports

regarding the assets, varied according to the terms of the CPPOMs and CPOMs as

described above.

51. HSBC as cash custodian was paid at least $1,874,000 in cash custodian

fees to perform its duties.

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

offering and accepting its duties.

53. The offering proceeds were deposited into Master Accounts at HSBC and

from there were moved into Trustee Accounts at HSBC. The funds were moved from

these accounts into other assets by wire instructions received by HSBC from

PEMGroup, or on Tranche letterhead, or from the trustees. Therefore HSBC had

firsthand knowledge of where the SPY Tranche funds were being expended. Milions of

dollars of such funds were transferred to noncustodial accounts at East West Bank in

Irvine California, to accounts in the names of PEMGroup affiiates such as Jorei and

COMPLAINT

-19 - Doc. #600752 v.2


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Zhongguo, to third party accounts of identified corporations and individuals or to title

company escrow accounts relating to real estate loan transactions or to PEMGroup and

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

circumvented the fundamental purpose of setting up custodial accounts and paying a

cash custodian. HSBC therefore had firsthand information that the SPY Tranche funds

were not being expended to acquire life insurance policies and timeshare investments,

and were not being kept in segregated custodial accounts.

54. In connection with their fraudulent scheme, Pang, the PEMGroup

Management Team and HSBC caused false and misleading Net Asset Value ("NA V")

Reports to be distributed to certain investors. These reports, which were prepared by

HSBC and had the HSBC logo affixed upon them, and were signed by an HSBC

official, purported to represent the net asset value of an investor's investment in the

applicable PEMGroup SPY, and were routinely distributed by Pang and PEMGroup

from PEMGroup's Irvine, California offices., to personnel in PEMGroup's office in

Taipei, Taiwan, and from there to investors.

55. HSBC knew that the NA V reports were fraudulent because all it did was

to verify that it held the applicable promissory note to the investor. HSBC knew that it

had made no effort to locate, identify and value the life insurance assets or the timeshare

assets. HSBC knew that it had made no effort to trace the funds sent to East West Bank,

or to or through PEMGroup and its affiiates, or to locate the funds transferred into

unauthorized loans, equity investments, mezzanine debt, real estate loans, Costa Rica

land, Chinese coal mines or investments in Chinese investment funds and companies, or

to value such assets.

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

DOCTYPENAV

NAVNAV

NAVNAV

TRANCHE DATE NAV SIGNEDAMOUNT BY

GVEC II CBO Series 8/1 0/06 $36,050,000.00 Not Signed2006 SamDle 1 2 and 3GVECRIVA 10/31/06 $76.1 71.680.00 Not Signed

GVECR CBO Series 2006 11/30/06 $4,580,437.50 Wilbur Quon-PIGVECR IV A 11/30/06 $76 534.760.00 Not Signed

GVECR CBO Series 12/19/06 $4594331.25 Andres SerranoCOMPLAINT

- 20- Doc. #600752 v.2


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2006- F 1

NAV GVECR iv A 12/31/06 $76.922.880.00 Not Signed

NAV GVECR CBO Series 2006 12/31/06 $4,603,106.25 Wilbur Quon-Fl

NAV GVEC II 36 Month Series 12/31/06 $55,456,805.56 Not Signed

2006-ANAV GVEC II 36 Month Series 12/31/06 $55,456,805.56 Not Signed




2006-ANAV GVEC II CDO 48 Month 12/31/06 $32,826,666.67 Not Signed

Series 2006NAV GVEC II CDO 48 Month 12/31/06 $32,~26,666.67 Not Signed

Series 2006NAV GVEC II CDO 48 Month 12/31/06 $32,826,666.67 Not Signed


Series 2006NAV GVECR CBO Series 2006 1/31/07 $4,625,043.75 Wilbur Quon

-FlNAV GVECR iv A 1/31/07 $77.298.480.00 Wilbur OuonNAV GVECR CBO Series 2006 2/1 0/07 $4,631,625.00 Wilbur Quon

-FlNAV GVECR iv 2006 C 2/28/07 $101.400.675.00 Wilbur QuonNAV GVECR iv A 2/28/07 $75382,920.00 Wilbur QuonNAV GVEC II 36 Month Series 3/31/07 $56,350,655.56 Not Signed

2006-ANAV GVEC II CDO 48 Month 3/31/07 $32,206,666.67 Not Signed


Series 2006 ,

NAV GVECR iv 2006 C 3/31/07 $101,950,950.00 Wilbur l uonNAV GVECR iv A 3/31/07 $75,796,080.00 Wilbur i uonNAV GVECR iv 2006 C 4/30/07 $102.434.525.00 Wilbur uonNAV GVECR iv A 4/30/07 $76.159.160.00 Wilbur uonNAV GVECR iv 2006 C 5/31/07 $102,951.450.00 Wilbur uonNAV GVECR iv A 5/31/07 $76,547 280.00 Wilbur uonNAV GVECR iv 2006 C 6/7 /07 $103,051,500.00 Wilbur uonNAV GVECR iV A 6/30/07 76910.360.00 Wilbur uonNAV GVECR iv A 7/31/07 77.298.480.00 Wilbur uonNAV GVECR iv A 8/7 /07 77.373.600.00 Wilbur uonNAV GVEC II Series 2006-A 12/31/07 55.456.805.56 Not Signed

NAV GVEC II CDO Series 12/31/07 32,826,666.67 Not Signed

2006NAV GVEC II CDO Series 12/31/07 $32,763,111.11 Not Signed

2006NAV GVECR CBO Series 2006 1/31/08 $4,625,043.75 Nelson Kercado

-FlNAV GVECR iV 2006 C 1/31/08 $100950450 Nelson KercadoNAV GVECR iv 2006 D 1/31/08 $80.399 780 Nelson Kercado

COMPLAINT

- 21 - Doc. #600752 v.2


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NAV GVECR iv A 1/31/08 $77.298 480 Nelson KercadoNAV GVECR iv A 2/7 /08 $77373.600.00 Nelson KercadoNAV GVECR iv 2006 C 2/29/08 $101.417350.00 Nelson KercadoNAV GVECR iv 2006 D 2/29/08 b80.772.926.67 Nelson KercadoNAV GVECR iv A 2/29/08 75395.440.00 Nelson KercadoNAV GVEC II Series 2006-A 3/31/08 56350.555.56 Not Signed


2006NAV GVECR CBO Series 2006 3/31/08 $5,074,027.78 Nelson Kercado

- BNAV GVECR iv 2006 C 3/31/08 $101 950.950.00 Nelson KercadoNAV GVECR iv 2006 D 3/31/08 $81 199.380.00 Nelson KercadoNAV GVECR iv A 3/31/08 $75 796.080.00 Nelson KercadoNAV GVECR iv 2006 C 4/30/08 $102434525.00 Nelson KercadoNAV GVECR iv 2006 D 4/30/08 $81 585 853.33 Nelson KercadoNAV GVECR iv A 4/30/08 $76.159.160.00 Nelson KercadoNAV GVECR iv 2006 C 5/31/08 $102.951.450.00 Nelson KercadoNAV GVECR iv 2006 D 5/31/08 $81.998.980.00 Nelson KercadoNAV GVECR iv A 5/31/08 $76.547.280.00 Nelson KercadoNAV GVECR CBO Series 2006 6/30/08 $4,602,375.00 Nelson Kercado

-FlNAV GVEC II Series 2006-A 6/30/08 -l55.446.875.00 Not Signed

NAV GVEC II CDO Series 6/30/08 -l32,504,444.44 Not Signed2006

NAV GVECR CBO Series 2006 6/30/08 $5,154,375.00 Nelson Kercado- B

NAV GVECR iv 2006 C 6/30/08 $100.433.525.00 Nelson KercadoNAV GVECR iv 2006 D 6/30/08 $79.986.653.33 Nelson KercadoNAV GVECR iv A 6/30/08 $76.910.360.00 Nelson KercadoNAV GVECR iv 2006 C 7/31/08 $100.950.450.00 Nelson KercadoNAV GVECR iv A 7/31/08 $77.298.480.00 Nelson KercadoNAV GVECR iv 2006 D 7/31/08 $80.399.780.00 Nelson KercadoNAV GVECR II Series 2008 H- 8/31/08 $8,540,729.17 Nelson Kercado

6NAV GVECR II Series 2008 H- 8/31/08 $12,439,320.83 Nelson Kercado

6NAV GVECR iv 2006 C 8/31/08 $101.450.700.00 Nelson KercadoNAV GVECR iv 2006 D 8/31/08 $80.799.580.00 Nelson KercadoNAV GVECR iv A 8/31/08 $75.420.480.00 Nelson KercadoNAV GVECR CBO Series 2006 9/30/08 $4,536,562.50 Nelson Kercado

-FlNAV GVEC II Series 2006-A 9/30/08 $56.340.625.00 Not Signed

NAV GVEC II CDO Series 9/30/08 $32,116,000.00 Not Signed2006

NAV GVECR II Series 2008 H- 9/30/08 $12,498,641.67 Nelson Kercado6


NAV GVECR II Series 2008 J 9/30/08 $15.685.436.63 Nelson KercadoNAV GVECR iv 2006 C 9/30/08 $101.934.275.00 Nelson KercadoNAV GVECR iv 2006 D 9/30/08 81.186.053.33 Nelson KercadoNAV GVECR iv A 9/30/08 75,783,560.00 Nelson KercadoNAV GVECR II Series 2008 H- 10/31/08 12,557,962.50 Nelson Kercado

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COMPLAINT

- 22- Doc. #600752 v.2


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NAV GVECR II Series 2008 J 10/31/08 $15759.419.42 Nelson KercadoNAV GVECR iv 2006 C 10/31/08 $102.451.200.00 Nelson KercadoNAV GVECR iv 2006 D 10/31/08 81.599 180.00 Nelson KercadoNAV GVECR iv A 10/31/08 76.1 71 680.00 Nelson KercadoNAV GVECR II Series 2008 H- 11/30/08 12,586,325.00 Nelson Kercado


7NAV GVECR II Series 2008 J 11/30/08 $15.758,685.42 Nelson KercadoNAV GVECR iv 2006 C 11/30/08 -$102,934,775.00 Nelson KercadoNAV GVECR iv 2006 D 11/30/08 81.985.653.33 Nelson KercadoNAV GVECR iv A 11/30/08 63.238.985.00 Nelson KercadoNAV GVEC II Series 2006-A 12/31/08 55.456,805.56 Not Signed


2006NAV GVECR CBO 2006 - Fl 12/31/08 $4.603.i 06.25 Nelson KercadoNAV GVECR CBO Series 2006 12/31/08 $5,155,277.78 Nelson Kercado

- BNAV GVECR II Series 2008 H- 12/31/08 $12,625,406.25 Nelson Kercado


7NAV GVECR II Series 2008 J 12/31/08 TI5.830.331.94 Nelson KercadoNAV GVECR iv 2006 C 12/31/08 $100.450.200.00 Nelson KercadoNAV GVECR iv 2006 D 12/31/08 $79,999.980.00 Nelson KercadoNAV GVECR iv A 12/31/08 $63.559.680.00 Nelson KercadoNAV GVECR CBO Series 2006 1/31/09 $4,625,043.75 Nelson Kercado

-FlNAV GVECR II Series 2008 H- 1/31/09 $12,684,487.50 Nelson Kercado


7NAV GVECR II Series 2008 J 1/31/09 -$15901.602.78 Nelson KercadoNAV GVECR iv 2006 C 1/31/09 $100950.450.00 Nelson KercadoNAV GVECR iv 2006 D 1/31/09 80399.780.00 Nelson KercadoNAV GVECR iv A 1/31/09 63.870030.00 Nelson KercadoNAV GVECR II Series 2008 H- 2/28/09 12,739,630.00 Nelson Kercado


7NAV GVECR II Series 2008 J 2/28/09 $15.965.746.53 Nelson KercadoNAV GVECR iv 2006 C 2/28/09 $101.400.675.00 Nelson KercadoNAV GVECR iv 2006 D 2/28/09 80.759.600.00 Nelson KercadoNAV GVECR iv A 2/28/09 60.450.840.00 Nelson KercadoNAV GVECR II Series 2008 J 3/31/09 16.044.144.44 Nelson KercadoNAV GVECR II Series 2008 H- 3/31/09 12,802,650.00 Nelson Kercado

6NAV GVECR iv 2006 C 3/31/09 87,898.940.00 Nelson KercadoNAV GVECR iv A 3/31/09 60.782.160.00 Nelson KercadoNAV GVECR iv 2006 D 3/31/09 76.172.655.00 Nelson KercadoNAV GVECR II Series 2008 H- 3/31/09 $8,825,633.33 Nelson Kercado

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COMPLAINT

- 23- Doc. #600752 v.2


1 57. The following emails requested NA V reports from HSBC or were sent by

2 HSBC personnel in transmitting the NA V reports, or were sent by PEMGroup personnel

3 enclosing NA V reports signed by HSBC:

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DOC DATE TRANCHE TO FROM CCTYPEE-mail 12/19/06 GVECR CBO Wilbur Quon, Andres

Series 2006 F 1 PEMG Serrano,HSBC

E-mail 12/19/06 GVECR CBO Ann Ru, Wilburn Quon, Chan, L.Series 2006 F 1 PEMG

E-mail 3/28/08 GVECR iV Sheryl Perez, NelsonNotes A PEMGroup Kercado,GVECR iV HSBCNotes CGVECR iVNotes D

E-mail 4/7 /08 GVECR CVO Sheryl Perez, NelsonSeries 2006-B PEMGroup Kercado,

HSBCE-mail 4/7 /08 GVECR 2006- Phoebe Sheryl Perez, Ru,A.

B Chang, ERM PEMGroup Day, V.Resource, Chan, L.Ltd. Quon. W.

E-mail 4/24/08 GVECR iV Phoebe Sheryl Perez, Ru,A.Notes A Chang, ERM PEMGroup Day,V.GVECR iV Resource, Nguyen, H..Notes C Ltd. Quon, W.GVECR iV Leanilo, L.Notes D

E-mail 5/23/08 GVECR iV Phoebe Sheryl Perez, Ru,A.Notes A Chang, ERM PEMGroup Quon, W.GVECR iV Resource, Nguyen, H.Notes C Ltd. Leanilo, L.GVECR iVNotes D

E-mail 6/18/08 GVECR 2006- Sheryl Perez, NelsonB PEMGroup Kercado,

HSBCE-mail 7/2/08 GVECR iV Phoebe Sheryl Perez, Ru,A.

Notes A Chang, ERM PEMGroup Quon, W.GVECR iV Resource, Nguyen, H.Notes C Ltd. Leanilo, L.GVECR iVNotes D

E-mail 7/2/08 GVECR iV Sheryl Perez, Nelson Nguyen, H.Notes A PEMGroup Kercado, Leanilo, L.GVECR iV HSBC Quon, W.Notes CGVECR iVNotes D

COMPLAINT

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E-mail 7/15/08 GVECR CBO Phoebe Perez, S. Quon, W.Series 2006 F 1 Chang, ERM Chan, L.

Resource, Day, V.Ltd. Ru,A.

E-mail 07/21/08 GVECR CBO Sheryl Perez, Nelson Nguyen, H.Series 2006 F 1 PEMGroup Kercado, Leanilo, L.

HSBC Quon, W.E-mail 8/1/08 GVECR iv Sheryl Perez, Nelson

Notes A PEMGroup Kercado,GVECR iv HSBCNotes CGVECR ivNotes D

E-mail 8/1/08 GVECR iv Phoebe Sheryl Perez, Quon, W.Notes A Chang, ERM PEMGroup Nguyen, H.GVECR iv R"esource, Leanilo, L.Notes C Ltd.GVECR ivNotes D

E-mail 9/4/08 GVECR iv Phoebe Sheryl Perez, Nguyen, H.Notes A Chang, ERM PEMGroup Leanilo, L.GVECR iv Resource, Quon, W.Notes C Ltd.GVECR ivNotes DGVECR II 2008H7GVECR II 2008H6

E-mail 10/6/08 GVECR iv Phoebe Sheryl Perez, Quon, W.Notes A Chang, ERM PEMGroup Chan, L.GVECR iv Resource, Day, V.Notes C Ltd. Lin, V.GVECR iv Leanilo, L.Notes D Nguyen, H.GVEC CBOSeries 2006 BGVECR II 2008H7GVECR II 2008H6GVECR II 2008JGVEC CVOSeries 2006 F 1

E-mail 10/31/08 GVECR iv Phoebe Sheryl Perez, Nguyen, H.Notes A Chang, ERM PEMGroup Leanilo, L.GVECR iv Resource, Quon, W.Notes C Ltd.GVECR ivNotes DTaichung 2008H6Coretech 2008H7

COMPLAINT

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Taichung 2008J

E-mail 12/2/08 GVECR iv Sheryl Perez, NelsonNotes A PEMGroup Kercado,GVECR iv HSBCNotes CGVECR ivNotes DTaichung 2008H6Coretech 2008H7Taichung 2008J

E-mail 1/7/09 GVECR iv Sheryl Perez, Nelson Nguyen, H.Notes A PEMGroup Kercado, Leanilo, L.GVECR iv HSBC Quon, W.Notes CGVECR iv

. Notes DTaichung 2008H6Coretech 2008H7Coretech CBO2006- BTaichung 2008JTS Super Fund

E-mail 2/3/09 GVECR iv Sheryl Perez, Nelson Nguyen, H.Notes A PEMGroup Kercado, Leanilo, L.GVECR iv HSBC. Quon, W.Notes CGVECR ivNotes DTaichung 2008H6Coretech 2008H7Taichung 2008JTS Super Fund

E-mail 3/2/09 GVECR iv Sheryl Perez, Nelson Nguyen, H.Notes A PEMGroup Kercado, Leanilo, L.GVECR iv HSBC Quon, W.Notes CGVECR ivNotes DTaichung 2008H6Còretech 2008

COMPLAINT

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H7Taichung 2008J

E-mail 4/3/09 GVECR iv Sheryl Perez, Nelson Nguyen, H.Notes A PEMGroup Kercado, Leanilo, L.GVECR iv HSBC Quon, W ~Notes CGVECR ivNotes DTaichung 2008H6Coretech 2008H7Taichung 2008J

58. In several respects, these NA V Reports were materially false and

misleading. First of all, some of the reports were prepared and distributed by the

PEMGroup Management Team, using HSBC letterhead provided by HSBC. Indeed, on

December 19,2006, a PEMGroup employee sent Pang and PEMGroup's CFO an email,

in which she stated that: "I am aware that recent NA Vs are issued by you NOT HSBC,

why?"

59. Additionally, these supposed NA V Reports were false and misleading as

they merely confirmed the face value (e.g., the amount invested by an investor) of

particular assets, as opposed to the actual NAVas of the date or the report. Typically,

the term "net asset value" denotes the market value of a particular asset, as of a

particular date, minus any liabilties associated with that asset.

60. The false and misleading NA V reports were a significant factor in

concealing the frauds being perpetrated by Danny Pang and The PEMGroup

Management Team from the investors and others. Truthful NA V reports would have

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

would have revealed that life insurance and timeshare assets were significantly

impaired, and would have revealed that hundreds of milions of Tranche and PEMGroup

funds had been diverted and misapplied into unauthorized assets which were

significantly impaired. Had the frauds been revealed earlier, they would have been

stopped and investigated, preventing milions of dollars of losses.

COMPLAINT

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

significantly declined after the date of the applicable offering. For instance, the entire

market for life insurance assets was severely depressed between 2007 and 2008, and yet

this was not reflected in the NA V Reports issued by Pang and PEMGroup. Also, a

number of the assets held by, and/or contàined in, the SPVs had been misappropriated

by Pang and PEMGroup. However, the resulting diminution in value of the affected

SPVs was not reflected in the NA V Reports.

62. Because many of the Tranche funds had been distributed to or loaned to

Pang and the PEMGroup Management Team, loaned to PEMGroup to pay

compensation or expenses, or diverted into unauthorized assets which were substantially

impaired, the diminution value of the Spy was not reflected in the NA V reports.

63. HSBC made no effort to identify, or locate any Spy assets to value them.

It made no effort to value the life insurance policies. It knew or was recklessly

indifferent to the fact that hundreds of millons of dollars of assets had been diverted

elsewhere but made no effort to trace or value assets acquired with the funds.

IMPROPER LOANS AND THEFTS BY PANG

64. At least as early as July 2007, Pang began to take unsecured and interest-

free personal "loans" from several of the SPVs and other PEMGroup related entities,

which contained proceeds of offerings. The overwhelming majority of these supposed

loans were never repaid to the SPVs or PEMGroup affiliates.

65. For instance, on or around July 26, 2007, Pang caused ERML (a

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

entity controlled by Pang.

66. Subsequently, on or around August 23, 2007, Pang caused ERML to lend

him $650,000.

67. In 2008 alone, Pang received total compensation from PEMGroup in the

amount of $32.9 milion. Irrespective of the fact that he caused PEMGroup to pay him

huge amounts of money in salary, as well as in questionable bonuses and commissions,

COMPLAINT

- 28- Doc. #600752 v.2


1 Pang supplemented his income by blatantly misappropriating funds from the SPY sand

2 PEMGroup affiliates.

3 68. On or around January 31, 2008, Pang caused GVECR iv Notes 2006 D to

4 lend $2 milion to LSPC, Inc. ("LSPC"), which is an entity entirely controlled by Pang.

5 On January 31, 2008, PEMGroup's Controller sent an email to Pang, PEMGroup's CFO

6 and a representative at East West Bank (which maintained an account for GVERC ivNotes 2006 D that contained investor funds), in which she requested that East West

7Bank, upon approval from Pang, transfer $2 milion from a GVECR iv account to

8LSPC's account.

969. In response to the Controller's email, Pang sent the following reply email

10to the Controller and the East West Bank representative: "Please accept this email as my

11approval. Thanks."

1270. Similarly, on or around April 22, 2008, Pang caused GVECR iv Notes A

13 to loan him $1 milion.

14 71. On or around April 23, 2008, Pang caused GVECR iv Notes A to lend

15 $1.5 milion to Nevada Capital Development Partners ("NCDP"), which is an entity

16 controlled by Pang.

17 72. Also, on or around September 26, 2008, Pang caused GVECR II 2007 C to

18 loan LSPC $2.5 milion.

19 73. On or about November 5, 2008, Pang caused GVECR II 2008 A and

20 GVECR II 2008 G to lend LSPC a total of $2.5 milion.

21 74. In total, Pang caused the SPVs and other PEMGroup entities to "lend" him

22 approximately $11,150,000. As of the fiing of this Complaint, Pang owed the SPVs

23 and PEMGroup $8.3 milion.

24 75. No contemporaneous formal documentation was created at the time of the

25 purported loans from the various SPVs to Pang and/or the various entities he controlled.76. The CPPOMs and CPOMs associated with the affected SPVs (e.g.,

26GVECR iv Notes A, GVECR iv Notes 2006 C, GVECR iv Notes 2006 D, GVECR II

272007 C, GVECR II 2008 A and GVECR II 2008 G) never disclosed to investors the

28COMPLAINT

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material fact that the proceeds of offerings could or would be used to make personal and

unsecured loans to Pang and/or entities controlled by Pang, such as LSPC, NCP and

NDCP.

77. Similarly, investors in the pertinent SPVs were never otherwise informed

that the proceeds of offerings could be used (and had been used) to make personal and

unsecured loans to Pang and/or entities controlled by Pang, such as LSPC, NCP and

NDCP.

78. In a February 9, 2009 memorandum to Pang and the other PEMGroup

partners, PEMGroup's General Counsel acknowledged that the loans made to Pang and

the entities controlled by Pang were "clearly outside the CPOMs and a clear breach of

our contractual and fiduciary obligations owned to investors."

79. In addition to the undisclosed "loans" that Pang caused the SPY s to make

to him, between 2007 and 2008 Pang misappropriated $13 milion from the SPY sand

used it to pay unearned "commissions" to himself and to his associates.

80. Typically, Pang and the PEMGroup Management Team paid themselves

commissions in connection with its acquisition of life insurance policies on behalf of

investors. These "commissions," which were 4% of the face value of the underlying

policy, were supposed to be paid to Pang and PEMGroup after they had acquired the

pertinent life insurance contracts.

81. Starting in late 2007, however, Pang directed the payment of

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

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

GVECR II Spy s, including GVECR II 2007 D, GVECR II 2007 E, GVECR II 2008 A,

GVECR II 2008 B, GVECR II 2008 C, GVECR II 2008 G, GVECR II 2008 Hand

GVECR II 2008 i.

82. The deals upon which the improper commissions were based were never

consummated. Nevertheless, as of May 1, 2009, the PEMGroup Management Team

members and PEMGroup executives that received the unearned $13 milion in

commissions associated with the failed deals have not repaid them.

COMPLAINT

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

information that the proceeds of offerings would be used to pay commissions to

PEMGroup Management Team members or PEMGroup executives for deals that never

happened.

84. Moreover, in March 2007, Pang misappropriated an additional $4 milion

from several Spy s. PEMGroup had accused its former president of embezzling

approximately $4 milion by causing several of the PEMGroup affiiated SPVs to pay

inflated amounts for life insurance policies, and then keeping a percentage of the

inflation for himself.

85. In March 2007, the former president attempted to pay $4 milion back to

the Tranches in settlement of those accusations. However, rather than depositing it into

the accounts of the appropriate SPVs, on March 13, 2007 Pang immediately

misappropriated the $4 milion by depositing the money into an account that he

controlled at East West Bank.

86. The account at East West Bank was in the name of GVEC Resource IV,

Inc. The mailing address for the account was the same address as PEMGroup's Irvine,

California offices: GVEC Resource IV, Inc., c/o Equity Resource Management, Ltd.,

One Park Place Plaza, Suite 550, Irvine, California 92614.

87. This account was created in connection with the formation of the GVECR

IV Spy s. But rather than close the account after the GVECR IV Spy s had been created

and funded, Pang instruCted that it be kept open for his personal and exclusive use.

Indeed, Pang kept a check book for this account in his desk drawer and repeatedly wrote

checks on this account for personal matters.

88. Once the $4 milion was deposited into the GVEC Resource IV account at

East West Bank, which Pang exclusively controlled, Pang proceeded to divide and

distribute these funds amongst PEMGroup's senior management and kept more than $2

milion for himself.

89. For instance, on or around March 13,2007, Pang wrote himself a check in

the amount of $500,000, which was drawn from the GVEC Resource IV account at East

COMPLAINT

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West Bank where the $4 milion that had been returned by the former PEMGroup

president had been deposited.

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

to Nevada Capital Holdings, an entity controlled by Pang, which was drawn from the

GVEC Resource iv account at East West Bank.

91. On or around March 13, 2007, Pang wrote a check for $250,000 to

Sundulas, an entity controlled by a senior PEMGroup employee, which was drawn from

the GVEC Resource iv account at East West Bank.

92. Again, on or around March 13, 2007, Pang wrote a check for $250,000 to

Q2 Resources, an entity controlled by PEMGroup's CFO, which was drawn from the

GVEC Resource iv account at East West Bank.

93. On or around March 17, 2007, Pang wrote himself a check for $600,000,

which was drawn from the GVEC Resource iv account at East West Bank.

94. On or around April 12, 2007, Pang wrote himself a check for $550,000,


95. On or around May 11, 2007, Pang wrote a $200,000 check for "CASH",

which was drawn from the GVEC Resource iv account at East West Bank where the $4

milion in investor funds that had been returned by the former PEMGroup president had

been deposited.

96. On or around July 7, 2007, Pang wrote himself a check for $600,000,


IMPROPER LOANS AND DIVERSION OF FUNDS TO PAY PEMGROUP

EXPENSES

97. At least as early as October 2006 and continuing through 2009, Pang and

the PEMGroup Management Team began using Tranche funds to make undisclosed

loans to PEMGroup to fund its lavish operating expenses. PEMGroup expended over

$100 milion in exorbitant expenses in this manner. By October 2006, PEMGroup's

bum rate had become unsustainable as result of the profligate spending that the

company undertook at Pang's direction. Because PEMGroup's expenses were in excess

COMPLAINT

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of even the exorbitant amounts that Pang and PEMGroup took in fees and commissions,

Pang was forced to identify alternate sources of funding to keep pace with PEMGroup's

expenses.

98. At leàst as early as October 2006, Pang decided to use the Tranche funds

that had already been raised, as well as funds that would be raised by PEMGroup in the

future, in order to pay PEMGroup's operating expenses. Specifically, Pang caused the

SPV s to make loans to PEMGroup, which, in turn, used the funds for various operating

expenses of the company, which include but are not limited to: payroll costs, the

opening of a new PEMGroup office in Shanghai, a 2007 Christmas party in China

(which was attended by employees from all PEMGroup offices) and a three-day 2008

Christmas party aboard a Disney cruise ship (which was attended by employees from all

PEMGroup offices).

99. For instance, on or around October 10, 2006, Pang and the PEMGroup

Management Team caused GVECR iv 2006 A to lend PEMGroup $2 milion. Pang

and the PEMGroup Management Team then used this $2 milion to pay the operating

expenses (e.g., rents and salaries) associated with PEMGroup's sales office in Taipei.

100. On or around January 23, 2007, Pang and the PEMGroup Management

Team caused GVECR iv 2006 C to lend PEMGroup $ 1 milion. Pang and the

PEMGroup Management Team then used this $1 milion to pay the operating expenses

(e.g., rents and salaries) associated with PEMGroup's office in Shanghai.

101. On or around June 5, 2007, Pang and the PEMGroup Management Team

caused GVECR iv 2006 D to lend PEMGroup over $4 milion. Pang and the

PEMGroup Management Team then used this $4 milion to pay the various expenses

(e.g., registered capital, rents and salaries) associated with PEMGroup's office in

Shanghai.

102. Additionally, on or around November 26, 2007, Pang caused GVECR iv

2006 C to lend $1.5 milion to PEMGroup. On November 21,2007, PEMGroup's CFO

wrote an email to Pang, which informed him that, "We have only $18k in available limit

on our AMEX and i project a cash need of $ 1 .3M by the end of next week and i haven't

COMPLAINT

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received the Global Exec invoice for the Dubai trip yet." In the email, the CFO asked

Pang whether he had, "Any thoughts on how we are going to service our cash crunch(,)"

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

Pang responded to the CFO's email and wrote "(g)o ahead to borrow 5 miL."

103. On or around December 14,2007, Pang caused GVECR IV 2006 C to lend

an additional $1.5 milion to PEMGroup in order to fund the company's operating

expenses, which included, but were not limited to, credit card bils, salaries and a

company trip to China. On December 14, 2007, the Controller for PEMGroup asked in

an e-mail that Pang and PEMGroup's CFO approve an "inter-account transfer of

$1,500,000 from GVECR IV... to PEMG." Approximately thirty minutes after the

Controller's request, Pang responded, "That's fine. Thanks." The Controller then asked

the CFO to approve the transaction as well, which he did.

104. On or around January 1, 2008, Pang caused GVECR IV Notes A to lend

PEMGroup $1 milion, in order to provide a $1 milion dollar retainer to the law firm

Fulbright and Jaworski LLP, which had been hired to perform services wholly unrelated

to the GVECR IV Notes A SPV.

105. On or around January 11,2008, Pang caused GVECR IV Notes A to lend

PEMGroup $200,000 to enable the company to meet its operating expenses, which

included, but were not limited to, company credit card bils and payroll costs.

106. On or around January 22, 2008, Pang caused GVECR IV 2006 C to lend

PEMGroup $500,000, which the company then used to pay its operating expenses,

which included, but were not limited to, credit card bils and payroll costs. On January

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

transfer of $500,000 from GVECR IV 2006 C to PEMGroup. Less than an hour later,

Pang responded and said, "Please accept this email as my approval."

107. On or around January 29,2008, Pang caused GVECR iV 2006 C to lend

PEMGroup $300,000, which the company then used to pay its operating expenses,

which included, but were not limited to, credit card bils and payroll costs. On January

29,2008, PEMGroup's Controller requested that Pang approve a $300,000 wire transfer

COMPLAINT

- 34- Doc. #600752 V.2


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from GVECR iv 2006 C to PEMGroup. One minute later on January 29, 2008, Pang

sent the Controller the following email response: "approved."

108. On or about July 28, 2008, Pang caused GVECR II 2007 C to loan

PEMGroup $3 milion. On July 28, 2008, PEMGroup's Controller asked in an e-mail

that Pang and PEMGroup's CFO approve a transfer of $3 milion from GVECR II 2007

C to PEMGroup. Within a few minutes, Pang responded via e-mail that the transfer was

"approved. "

109. On November 19, 2008, Pang caused GVECR iv 2006 C to loan

PEMGroup $500,000. On November 19,2008, PEMGroup's Controller informed Pang,

as well as the COO and CFO of PEMGroup, that "(p )ayment of the AMEX is due in full

today and we need to remit at least $100K to Taipei for their November expenses.

Kindly approve PEMG to borrow $500K from GVECR iv 2006 C." Approximately 6

hours later on November 19,2008, Pang sent the following email response: "Approve."

110. On or about November 26,2008, Pang caused GVECR II 2007 C to lend

$1.5 milion to PEMGroup. On November 26, 2008, PEMGroup's Controller informed

Pang and PEMGroup's COO that, "We have some payables due to be paid today

including payroll, payment for Disney Cruise, remittance to Taipei and monthly

expenses." The Controller asked that Pang approve a $1.5 milion loan from GVECR II

2007 C to PEMGroup, and also informed Pang that "...we wil need additional $500K by

the week of December 8th." A few minutes after receipt of the Controller's November

26, 2008" Pang responded and wrote, "Please accept this email as my approval for both

$ 1.5 mil and $500,000 transaction."

111., The CPPOMs and CPOMs associated with the affected SPY s never

disclosed to investors the plainly material information that the proceeds of offerings

could be used to make "loans" to PEMGroup to enable the company to fund its

exorbitant operating expenses.

112. Similarly, investors in the pertinent SPVs were never otherwise informed

of the material information that the proceeds of offerings could be used (and had been

COMPLAINT

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

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

UNAUTHORIZED LOANS TO PEMGROUP TO FUND THE COMPANY'S

ACQUISITION OF AIRCRAFT

113. In addition to the undisclosed loans to PEMGroup for its operating

expenses, in 2007, Pang and the PEMGroup Management Team caused Tranche funds

to be utilized to make loans to PEMGroup for the purpose of aircraft acquisitions. On

March 14, 2007, Pang and the PEMGroup Management Team caused a $2.1 milion

loan to be made from GVECR IV 2006 C to InterTravel and Services, Inc., an entity

controlled by Pang and PEMGroup.

114. In June 2007, Pang and the PEMGroup Management Team caused an $18

milion loan to be made from GVECR IV 2006 D to InterTravel and Services, Inc.,

which is an entity controlled by Pang and PEMGroup. This $18 milion dollar loan was

used to fund the purchase of a Gulfstream G4 aircraft for PEMGroup. The investor in

GVECR IV 2006 D was never told that the proceeds of the offering could be used (and

had been used) to make loans to PEMGroup for the purpose of purchasing aircraft for

the company.

115. On October 16,2007, Pang and the PEMGroup Management Team caused

an $11 milion loan to be made from GVECR II 2007 C to Inter Travel and Services,

Inc. This $11 milion dollar loan was used to fund the purchase of Lear Jet aircraft for

PEMGroup. The investor in GVEC II 2007 C was never told that the proceeds of the

offering (and had been used) to make loans to PEMGroup for the purchase of aircraft for

the company.

116. In a February 9, 2009 memorandum to Pang, others on the PEMGroup

Management Team and the other PEMGroup partners, PEMGroup's General Counsel

acknowledged that the loans made to PEMGroup were improper:

I am of the opinion that many of the loans to the PEMGROUPcompanies do not fall with the provisions of the CPOMS the basisupon which the funds were provided by the investors and set out the

contractual obligations that the issuers and their agents andsubcontractors, namely our good selves, are subject. As a result if

COMPLAINT

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there is a shortfall with respect to repayment of the Tranches to theinvestors and this shortfall is in any way impacted as a result of suchloans the liabilty for that shortfall wil, I consider, fall upon you as theproprietors. The rationale being not only is there a clear breach ofcontractual obligations, but also a breach of the fiduciary duty owed toinvestors with regard to the management and investment of their funds.

NONCONFORMING INVESTMENTS

117. During 2007 and 2008, Pang and the PEMGroupManagement Team made

the following nonconforming investments from offering proceeds into high risk and

imprudent loans, equity investments, mezzanirie debt, real estate loans, undeveloped

land in Costa Rica, investment into a Chinese company which owns coal mines, and

investment into Chinese investment funds, which were never disclosed to the investors

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

proceeds described and set forth in the CPOMs:

a. On January 16,2007, Pang and the PEMGroup Management Team

caused $1,200,000 of funds from the GVEC Resource iv, Inc. 2006 D Tranche to

be loaned through a PEMGroup affiliate to an individual, secured by two 2,500

sq. ft. industrial buildings located in Santa Ana, California.

b. On January 29, 2007, Pang and the PEMGroup Management Team

caused $2,700,000 of GVEC Resource iv, Inc. 2006 D Tranche funds to be

loaned through a PEMGroup affiiate to an entity, secured by 95.7 acres of land

in Lake Elsinore, California. In 2008, the loan was extended and assigned to

J orei Enterprises, LLC.

c. On March 8, 2007, Pang and the PEMGroup Management Team

caused $2,100,000 of funds from the GVEC Resource iv, Inc. 2006 C Tranche to

be loaned to an entity, and secured by a 2,700 sq. ft. front lot zoned commercial

and back lot residential in San Clemente, California.

d. On April 20, 2007, Pang and the PEMGroup Management Team

caused $7,430,000 in funds from the GVEC Resource IV,Inc. 2006 C Tranche to

be loaned an entity to fund the design of a luxury ship with 200 private

residences and 265 suites for cruise passengers.

COMPLAINT

- 37- Doc. #600752 v.2


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

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

to an individual, and secured by a single family, 2,800 sq. ft. residence in

Riverside, California.

f. On May 15, 2007, Pang and the PEMGroup Management Team

caused the GVEC Resource iv, Inc. 2006 C Tranche to loan $19,109,000 of

funds to an entity, to acquire parcels of land in Arizona, Florida and North

Carolina which were zoned for hotel development.

g. On June 7, 2007, Pang and the PEMGroup Management Team

caused $1,650,000 of funds from the GVEC Resource III, Inc. A-4 Tranche to be

loaned to an individual and secured by an office building built in 1954 located in

Fresno, California.

h. On June 19, 2007, Pang and the PEMGroup Management Team

caused the GVEC Resource III, Inc. A-4 Tranche to invest $2,650,000 in a

partnership interest in a private investment fund which acquired an interest in a

pink sheet company and oil and gas exploration and production services in Russia

and Kazakhstan and also received a Russian Angel note receivable.

1. On July 18, 2007, Pang and the PEMGroup Management Team

caused GVEC Resource III, Inc. A-4 Tranche to invest $3 milion to acquire

common membership interests in a private company which had a clothing line

and a TV reality show for sports.

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

caused $740,000 of funds from the GVEC Resource III, Inc. A-4 Tranche to be

loaned through a PEMGroup affiiate to an entity, secured by 10.01 acres of land

and a one-story office building and shop building located in Taft, California.

k. On August 14,2007, Pang and the PEMGroup Management Team

caused $6,500.000 of funds from the GVEC Resource iv, Inc. 2006 D Tranche to

be loaned through a PEMGroup affiiate to an entity, and secured by 160 acres of

land located in Nye County, Nevada.

COMPLAINT

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

Management Team caused the GVEC Resource iv, Inc. 2006 C and GVEC

Resource iv, Inc. 2006 D Tranches to invest $11,800,000 in a company, which

distributes building materials and tools and provides installation services to

businesses and government.

m. On September 7, 2007, Pang and the PEMGroup Management

Team caused $41 milion of funds from the GVEC Resource iv, Inc. 2006 A,

2006 C and 2006 D Tranches to be loaned to PEMGroup affiiate, GVEC

Acquisitions, Inc., which used the loan to acquire shares in Chipa Natural

Investment Holding Company, a Chinese company involved in acquiring,

exploring and developing mining properties in China with a strong focus in coal,

including five coal mines.

n. On November 30, 2007 and August 20, 2008, Pang and the

PEMGroup Management Team caused the GVEC Resource iv, Inc. 2006 D

Tranche to loan $13,346,000 to a public company which designs, manufactures

and markets electronic devices and communications equipment for aerospace

defense, industrial and communications applications.

o. On December 14, 2007, Pang and the PEMGroup Management

Team caused the GVEC Resource II, Inc. 2007 C Tranche to invest $10 milion

in property on which a restaurant and boat slip are located in Newport Beach,

California.

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

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

PEMGroup affiiate to an individual, and secured by a beach front single family

residence in Laguna Beach, California.

q. On February 4, 2008, Pang and the PEMGroup Management Team

caused the GVEC Resource II, Inc. 2007 E Tranche to loan $7,200,000 to an

entity, a public company which was a specialty retailer of footwear and

accessories for young women.

COMPLAINT

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

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

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

commercial and office building at 351 California Street in San Francisco,

California.

s. On July 14, 2008, Pang and the PEMGroup Management Team

caused the GVEC Resource II, Inc. 2007 E, 2008B, 20081 and 2007B Tranches

and Fides to provide $35,000,000, to a PEMGroup affiliate, to purchase the

senior Deed of Trust on the 16 story commercial and office building at 351

California Street in San Francisco, California.

1. On April 24, 2008, Pang and the PEMGroup Management Team

caused the GVEC Resource II, Inc. 2007 D Tranche to loan $500,000 to an

entity, a private global technology solutions provider of enterprise business

intellgence.

u. On April 29, 2008, Pang and the PEMGroup Management Team

caused the GVEC Resource II, Inc. 2008 B Tranche to loan $1,800,000, through

a PEMGroup affiiate, to an entity, and secured by property consisting

approximately 11.62 acres of land in Riverside, California.

v. On May 22, 2008, Pang and the PEMGroup Management Team

caused the GVEC Resource II, Inc. 2008 B Tranche to loan $4,200,000, through

a PEMGroup affiliate, to an entity, secured by 66 acres of raw land zoned for

residential located in Redlands, California.

w. On May 21, August 8, September 16, October 10 and October 21,

2008, Pang and the PEMGroup Management Team transferred $17,711,000 of

funds from the aVEC Resource II, Inc. 2008 B, 2008 C and 2008 E, GVEC

Resource II, Inc. 2007 C and GVEC Resource II, Inc. 2007 E Tranches to

Zhongguo Investment Corporation, a PEMGroup affiiate and investment fund

which invested in Chinese investments, including an equity investment in a solar

COMPLAINT

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company, convertible debt investment in an iron or mining company, and wired

money to two other development companies and paid management fees.

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

Management Team caused the GVEC Resource II, Inc. 2007 C and 2007 D

Tranches to use $8,713,000 to acquire undeveloped land in Costa Rica consisting

of 955 acres.

y. On August 12,2008, Pang and the PEMGroup Management Team

caused the GVEC Resource II, Inc. 2007 E Tranche to loan $5 milion, through a

PEMGroup affiiate, to an entity, an investment company in Taiwan which

engages in the manufacture and sale of fiberglass yarns.

z. On August 29,2008, Pang and the PEMGroup Management Team

caused the GVEC Resource II, Inc. 2008 A Tranche to loan $4,353,000, through

a PEMGroup affiliate, to a mezzanine lender, secured by membership interests in

the mezzanine lender. The mezzanine lender's loan was secured by unsold tenant

in common interests in the real property which consisted of retail commercial

buildings and a big block building.

aa. On September 26, 2008, Pang and the PEMGroup Management

Team caused the GVEC Resource II, Inc. 2007 E Tranche to invest $2,300,000 in

a partnership interest in a fund that invested in a public bank holding company

that provides financial products and services through offices in California and

Arizona.

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

knowledge regarding the disbursement of the assets in its control:

23INSTRUCTIONS INSTRUCTIONS DATE WIRE AMOUNT BANK TO WIRE

24 To FROM RECEIVE RECIPIENT ORWIRE SPECIFIED

25 PUROSEHSBC Pang, D. 4/20/07 $6,402,000.00 Bank of Oceano

26 Ouon. W. Oklahoma EscrowHSBC Pang 4/20/07 $1,030,000.00 Bank of Oceano

27 Ouon Oklahoma EscrowHSBC Quon, W. 6/11/07 $1,650,000.00 East West Thomas

28 Mendel P. Bank Savile LoanCOMPLAINT

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- RepaymentHSBC Quon, W. 6/11/07 $5,000,000.00 East West Money

MendeL. P. Bank Market FundHSBC Quon, W. 6/18/07 $18,000,000.00 East West Inter Travel

Pang, D. Bank and Services,Inc.

HSBC Quon, W. 6/19/07 $2,650,000.00 East West RussinaPang, D. Bank Angel

Acquisition,LLC

HSBC Quon, W. 7/18/07 $1,000,033.33 Bank of Self MadeMendeL P. America Inc.

HSBC Quon, W. 7/18/07 $1,000,033.33 Bank of SimplyMendeL. P. America Believe, Inc.

HSBC Quon, W. 7/18/07 $1,000,033.33 Union Miracle ManMendel, P. Bank of Entertainment

CaliforniaHSBC Quon, W. 7/18/07 $135,000.00 East West Private

Mendel, P. Bank EquityManagement

GroupHSBC Quon, W. 7/18/07 $365,000.00 Bank of TapouT, LLC

MendeL. P. AmericaHSBC Pang, D. 8120/07 $10,066,666.58 Citibank JFI-HDS,

Ouon. W. LLCHSBC Pang, D. 10/16/07 $11,000,000.00 East West Inter Travel

Quon, W. Bank and Services,Inc.

HSBC Mendel, P. 11/30/07 $1,926,773.53 Wells PasadenaAnderson, R. Fargo Office - Pay

Bank off EmriseHSBC Mendel, P. 11/30/07 $4,073,226.47 Wells Remainder of

Anderson, R. Fargo Term A LoanBali - Emrise

Corp.HSBC Daily, 1. 12/17/07 $10,000,000.00 East West Nevada

Knudson, W. Bank CapitalHoldingsPartnersProperty

i InvestmentHSBC Daily, 1. 2/4/08 $7,200,000.00 Bank of Term Loan

Knudson, W. America BakersRetail Footwear

Finance Group Inc.HSBC Daily, 1. 2/4/08 $300,000.00 East West Closing Fee

Knudson W. BankHSBC Daily, 1. 8/6/08 $2,500,000.00 East West Dominical

Knudson. W. Bank HoldingsHSBC Daily, 1. 8/6/08 $2,500,000.00 East West Dominical

Knudson, W. Bank Holdings -Loan

Agreementdated 8/6/08

HSBC Daily, 1. 8/20/08 $286.660.61 Sun Loan #COMPLAINT

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Knudson, W. National 670600 -Bank Payoff

HSBC Daily, 1. 8/20/08 $31,860.92 Sun RetentionKnudson, W. National Bonuses

BankHSBC Daily, 1. 8/20/08 $5,000,000.00 UBS AG Charles and

Knudson, W. Peggy BrandEmrise

HSBC Daily, 1. 8/20/08 $2,500,000.00 Wachovia Charles andKnudson, W. Bank Peggy Brand

EmriseHSBC Daily, 1. 8/20/08 $2,257,439.21 Oppenhei Charles S.

Knudson, W. mer BrandFunds, EmriseUnited

MissouriBank

HSBC Daily, 1. 8/20/08 $1,219,679.90 Hudson Joanne K.

Knudson, W. City Couse,Savings Thomas P.M.

Bank CouseEmrise

HSBC Daily, 1. 8/20/08 $1,219,679.90 Hudson Michael L.Knudson, W. City Gaffney

Savings EmriseBank

HSBC Daily, 1. 8/20/08 $123,199.99 Wachovia EmriseKnudson. W. Bank

HSBC Daily, 1. 8/20/08 $21,750.00 Wachovia AdditionalKnudson, W. Bank Deposit -

Change in. Control

HSBC Daily, 1. 8/20/08 $339,808.92 East West Advisory FeeKnudson, W. Bank and Legal

FeesHSBC Daily, J. 10/7/08 $4,000,000.00 East West Dominical

Knudson, W. Bank Holdings -additional

draw on loanagreement

dated 8/6/08

PLAINTIFF'S DISCOVERY OF THE DEFENDANTS' TORTIOUS CONDUCT

119. Commencing in 2003 and continuing through April 24, 2009, PEMGroup

and its affiliates were adversely dominated by the PEMGroup Management Team and

the PEMGroup Directors, who were responsible in whole or in part for the injuries to

PEMGroup and its affiliates. Specifically, all of the PEMGroup Directors adversely

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

COMPLAINT

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No independent, disinterested Director was appointed or participated in the control of

PEMGroup and its affiiates.

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

commenced an action against Danny Pang, PEMG Inc. and PEMG LLC, seeking,

among other relief, the entry of a temporary restraining order and the appointment of a

receiver to take control of the entities and their assets.

121. On April 27, 2009 the Court entered an order appointing Robert Mosier as

temporary receiver and on July 2, 2009 the Court entered an order permanently

appointing Robert Mosier as permanent receiver, vesting him with the authority set forth

in paragraph 4.

122. Later, on July 2 and August 10, 2009 the Court entered supplemental

orders placing additional affiiate entities under the authority of the receivership.

123. Mr. Mosier and a team of accounting, legal and other professionals

immediately began marshalling the assets of PEMGroup and its affiiates, reviewing and

studying the books and records of the entities, relevant transactions, corporate15' expenditures, and sources and uses of funds.

16 124. Prior to this work, Plaintiff could not reasonably have discovered the value

17 or the validity of the claims stated herein.

18 125. As a result of the adverse domination of PEMGroup and its affiliates by

19 the PEMGroup Management Team and the PEMGroup Directors, neither PEMGroup or

20 its affiliates discovered or reasonably could have discovered the facts giving rise to the

21 claims for relief set forth herein during the period of adverse domination, which

22 continued until the appointment of Robert Mosier as an independent receiver.

23 COUNT I -AIDING AND ABETTING BREACH OF FIDUCIARY DUTY

24 126. Plaintiff hereby incorporates by reference the proçeeding paragraphs 1-125

25 as set forth herein.

26 127. As president and a director of PEMG, Inc., Pang controlled and directed

27 the actions and operations ofPEMG, Inc.

28COMPLAINT

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128. As a managing member of PEMG, LLC, Pang controlled and directed the

actions and operations ofPEMG, LLC.

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

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

130. The PEMGroup Management Team, as officers and directors of

PEMGroup, also owed PEMGroup the fiduciary duties of care, honesty, loyalty and full

disclosure.

131. Commencing in 2003 and continuing through March 2009, and as set forth

more fully above, Pang and the PEMGroup Management Team breached their duties of

care, honesty, loyalty and full disclosure by:

a. Distributing false and misleading NA V Reports to investors;

b. Improperly making interest payments with offering proceeds to

earlier investors in PEMGroup and the Tranches;

c. Improperly purchasing impaired life insurance policies from earlier

SPY Tranches;

d. Making loans from the Spy Tranches to PEMGroup to fund

PEMGroup's exorbitant operating expenses, including funding the establishment

of lavish office locations, purchasing corporate jets, and funding excessive travel

and entertainment expenses;

e. Making unsecured and undocumented personal loans to Pang;

f. Making unsecured and undocumented loans to entities controlled

by Pang;

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

unauthorized and imprudent loans and investments not in accordance with the

uses of funds set forth in the CPOMs or the CPPOMs; and

h. Paying Pang and the Management Group excessive and unearned

fees, bonuses, and commissions with the offering proceeds.

132. HSBC knowingly and/or recklessly and substantially aided and abetted;

assisted; encouraged; conspired with; authorized; and/or requested, commanded, ratified

COMPLAINT

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or recklessly tolerated the statements and actions of co-conspirators Pang and the

PEMGroup Management Team by assisting Pang and the PEMGroup Management

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

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

directing wire transfers of investor funds into unauthorized investments. These actions

aided and abetted Pang and the PEMGroup Management Team in breaching their

fiduciary duties of care, honesty, loyalty and full disclosure.

133. As a direct and proximate cause of the conduct of HSBC and its co-

conspirators Pang and the PEMGroup Management Team,PEMGroup has sustained

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

fully above.

134. PEMGroup is also entitled to disgorgement of the fees HSBC was paid as

cash custodian.

COUNT II - AIDING AND ABETTING CONVERSION

135. Plaintiff hereby incorporates by reference the proceeding paragraphs 1-134

as set forth herein.

136. As set forth fully above, Pang and the PEMGroup Management Team

solicited investors to invest in PEMGroup and the Tranches for the purpose of

purchasing specific assets, including life insurance and time-share related assets.

137. When PEMGroup received the offering proceeds on behalf of the SPVs

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

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

and the PEMGroup Management Team used a substantial portion of the offering

proceeds to:

a. Make interest payments to earlier investors in PEMGroup and the

SPY Tranches;

b. To purchase impaired life Insurance policies from earlier Spy

Tranches;

COMPLAINT

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c. To make loans to PEMGroup to fund its exorbitant operating

expenses, including funding the establishment of lavish office locations,

purchasing corporate jets, and funding excessive travel and entertainment

expenses;

d. To make unsecured and undocumented personal loans to Pang;

e. To make unsecured and undocumented loans to entities controlled

by Pang;

f. To misapply and divert the offering proceeds into improper,

unauthorized and imprudent loans and investments not in accordance with the

uses of funds set forth in the CPOMs or the CPPOMs ; and

g. To pay themselves excessive and unearned fees, bonuses, and

commissions.

138. By virtue of the forgoing conduct, Pang and the PEMGroup Management

Team have intentionally, unlawfully and wrongfully deprived PEMGroup and the SPY

Tranches it controlled of the funds to purchase the promised assets, thereby seriously

interfering with PEMGroup's and the Spy Tranches' abilty to pay their debts.

139. HSBC knowingly and/or recklessly and substantially aided and abetted;

assisted; encouraged; conspired with; authorized; and/or requested, commanded, ratified

or recklessly tolerated the statements and actions of co-conspirators Pang and the

PEMGroup Management Team by assisting Pang and the PEMGroup Management

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

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

directing wire transfers of investor funds into unauthorized investments. These actions

allowed Pang and the PEMGroup Management Team to convert the funds that should

have been used to purchase the promised assets set forth in the CPOMs or the CPPOMs.

140. As a direct and proximate cause of the conduct of HSBC and its co-

conspirators Pang and the Management Group, PEMGroup has sustained damages in an

amount to be proven at trial including those damages described more fully above.

COMPLAINT

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COUNT III - GROSS NEGLIGENCE

141. Plaintiff hereby incorporates by reference the proceeding paragraphs 1 - 140


142. HBSC prepared and distributed and allowed Pang and the PEMGroup

Management Team to prepare and distribute false NA V Reports to PEMGroup's

investors using HBSC letterhead.

143. These false and misleading NA V Reports were meant to conceal the

improper and unauthorized diversions of funds.

144. The false and misleading NA V Reports did in fact conceal from the

investors the improper and unauthorized diversions of funds.

145. As described more fully above, these offering proceeds were then looted

and misappropriated by Pang and the PEMGroup Management Team, with the

assistance of HSBC. More specifically, HSBC wire transferred these offering proceeds

to Pang and the PEMGroup Management Team and wire transferred these funds into

unauthorized investments.

146. In preparing and distributing false NA V Reports, allowing Pang to prepare

and distribute false NA V Reports, and in improperly transferring the offering proceeds

to Pang, the PEMGroup Management Team, and to unauthorized investments, HSBC

acted with gross negligence, as evidenced by HSBC's want of even scant care and

extreme departure from the ordinary standard of conduct of an entity in its position.

147. As a direct and proximate result of HSBC's gross negligence, PEMGroup

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

fully above.

COUNT IV- CONSTRUCTIVE TRUST

148. Plaintiff hereby incorporates by reference the proceeding paragraphs 1-147


149. HSBC received cash custodian and other fees from PEMGroup totaling at

least $1,874,000.

COMPLAINT

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150. As set forth above, HSBC wrongfully obtained those fees by representing

that it would act as cash custodian for the proceeds of the offerings.

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

and misleading NA V Reports to investors, directed funds received from the investors to

go to Pang and the PEMGroup Management Team instead of purchasing the promised

assets, and directed wires of investor funds to unauthorized investments.

152. Thus, HSBC has wrongfully received and retained cash custodian fees

without performing its duties as cash custodian.

153. By virtue ofHSBC's wrongful conduct, HSBC holds such fees, as well as

all profits of such fees, as constructive trustee for PEMGroup's and its affiiates' benefit

pursuant to CaL. Civ Code § 2224.

154. Plaintiff alleges that the amount exceeds $1,874,000, plus interest thereon

at the rate of 8% per annum or as allowed by law.

155. Plaintiff requests that the Court impose such constructive trust as

necessary to protect and preserve PEMGroup's and its affiliates' rights and interests,

and to return these fees to PEMGroup and its affiiates, the rightful owner of the funds.

JURY TRIAL DEMANDED

156. Pursuant to Fed. R. Civ. P. 38 and Fed. R. Civ. P. 81, Plaintiff Robert P.

Mosier, hereby demands a trial by jury on all issues so triable in this action.

PRAYER FOR RELIEF

WHEREBY PLAINTIFF PRAYS FOR THE FOLLOWING RELIEF:

1. Compensatory damages in an amount to be proven at trial;

2. A constructive trust for the benefit ofPEMGroup to be imposed upon thecash custodian and other fees that HSBC has received from its wrongfulacts;

3. Disgorgement of all cash custodian and other fees paid to HSBC;

4. All costs of the proceedings herein;

5. Pre and post judgment interest; and

COMPLAINT

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6. Any other relief the court deems appropriate.)~

"')1 ,-

DATED this ~ day of May, 2010.

STEPTOE & JOHNSON LLP

By: 1/1~ rFrancis 1. Bi rke, Jr.Seong Kim

Attorneys for Plaintif

Robert P. Mosier

COMPLAINT

- 50- Doc. #600752 v.2


e eSteptoe & Johnson LLPFrancis 1. Burke, Jr. (SBN 75970)Soong Kim (SBN 166604)2121 Avenue of the Stas, Ste. 2900

Los Angeles, CA 90067-5052Telephone: 310-734-3200

- 1 ' \ r, \l- _" l (' l.,: \l ; .' ".' l ¡ ,.... : : \ i .I ..'~ I\ '¡" ., i' I \:. i . .._"....) i \ : \,~.~ ¡ i

UNITED STATES D~TICT COURTCENTRAL DISTRCT OF CALIFORNIA

ROBERTP. MOSIER, as Receiver for PRIATE CAS~ V 10 36 ÓU,EQUIY MAAGEMNT GROUP, INC. and.. 7 GHK IT:,,lPRl ATE EQUIY MAAGEMNT GROUP LLC l.tr,(\ l" d i:\i \ '( s U b~'i d \Q ri es Q ri ll'(¡ liQ1ëLA(S)

v.

HSBC BAN USA, N.A.

l SUMMONS

DEFENAN(S).

TO: DEFENDAN(S): HSBC BAN USA, NA

A lawsuit has been fied against you.

Within .21 days afer service of ths summons on you (not counting the day you received it), youmust se.rve on the plaintiff an answer to the atached It complaint 0' amended complainto counterclaim 0 cross.claim or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answeror motion must be served on the plaintiffs attorney, Fracis J. Burke, Jr. . whose address isSteptoe & Johnson, LLP, 2121 Avenue of the Stas, -gte. 2800, Los Angeles, CA 90067 . If you fail to do so,

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

i 4 MAY 20m

a~ U4sOct. C_

Br- ~/UDeput Clerk

(Sal of the Court)

~ )-k--2;Dated:

(Use 60 day if the defendant Is the United Sttes or a United States agency, or Is an offcer or flmployee of the United States. Allowed60 day~ by Rule 12(a)(3)).

CV..lA(12/01) SUMMONS

:J .....


1t.~-- -

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"'f"'),. 5''' ~ ~. I

UNITED STATE DISTRCT COURT, CENTR DISTlCT OF CALIFRNCI COVER SHET

I (II) PLANTIF (Chec box if you ar recscillngyOUolf Cl DEFNDANTSRober P. Mosier aSBe Bak USA, NAPriVale Equit Magement Oi11. Inc.Prival Eqit Manap~t Group,LL

(b) Atlomcy (Fin Nam, Addr and Telephone Number. ifyollll ~prn8 Atomoys (If Known)younol. prode _e.)Franci 1. Burk Jr. and Sco KimStepto & Johon,21Z1 Avon!'e ofthc Sia SIc. 2800,L, Aigoles. CA9007-052

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DRFOoveent No II Par) Ciize ofTh St 01 01 Inoor or Pripal Place 04ofBiijieu in this Stle

02 U.S. Oovenuent Oeendan rJ4 Diverity (Indi~ Ciip Ciizen of Anoter Sfa 02 02 Incoi and Pricial Plac OS tisofParcs in Iloi nl) ofBiili~a bi Another StCIen or Subje of II Fo~ign qointr 03 03 Forign Nation 06 06

IV. ORIGIN (plac M X in one box ony.)

rli Orginel 0 2 Remond from 0 3 Remanded frm 0 4 Reld ii 0 S Traerrd frm aner distrct (speoif): 0 6 Mul.Prcceing S1 Cour Appellat Coii Repened DistclUtgaon

V. REUETED IN COMPLAT: .JVDEMA: l'Yec Cl No (Chek 'Yes' oiyifdemaded in conila)CLS ACfION iid.. F.R-C.P, 23: ,0 Yes irNo 0 MONE DEMADED IN COMPLAIN: $VL 'CAUSE OF ACTON (Clfe ii U.S. Civi St unil which you ar fiin and wr a brefstei of ClI. Do not cite juiidiotnel8f iieu diveit.)

is U.S.C. Sec. 71$7, 1332; aidi ai abtt breh offi du, coiivmon; gr naglîgence

VJ NATUOirSUlT(1ceanXlnoielounl.) ,

o 7 App to DlitrciJudge fmiM.p$ Judge

0210 Lad Condemnllo 220 FORCI08

23 Ront l. &. Ejectoir c: 462 NaIlitino 240 Tom to Lad Applioalino 24S Tort Product Liabilit' 0 013 RabOl. Coi.o 290 An Oter Re Prert Alien Dell..

o 46'S 0I llisnonAòtlon

0400 St Reoronmen i: 110 lmurc0410 Antitsl . i: 120 Mare0430 &n and Ba . 0 130 Miller Aco 4S0 ComißCC 0 140 Negoable IDstt

llcsolc. 0 iso Roovet cio 460 D~itOl Overayt &.CJ 470 Raeteer ùiUOed Enorcmen ofand Comipt IDdgnl

Oranzaon Cl is 1 Medica Act0480 OinserCiI IS2 ReeiofDefaulfeCl 4~0 Calelai TV Slt Lo (El.o 810 Sol~e Sorce Vet)o SSO Secuties/Coesl IJ LS3 Recver ofExchae Ovymnt of0875 Customer CboUenge 12 Vct's Bets

USC 3.$10 0 160 Stldei'SullSo 890 Oter Sllloi Aclor 0 190 Oter Co0891 Agrcil Ac 019S Contra Prl1Q\0892 lmnonc Stiliztion LiabiIAct 0 196 Ftsoi: 893 Enviroental Matli: 894 Ener AI0c Acti: 89S Freedom oflno. Aci0900 A¡l of Fee Det

nallon Uncl EqAceu to IiiÎcc

Cl 950 Coiioiiity ofStle Slatcs

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Slllclcrci 330 Fed. £lploy'

LlabUiIo 340 Ma~o 3" Mi Prl

Liabilityo 350 Moto Vohiolo0355 Molor V.hlol.

Prduct Liabilly

360 Olcr PClOlal

Injui0362 Pmo41 IAur.

Med Ma¡ncto 365 Ponon IAury.

Prot Ljabililo 368 Alboto Peonftl

Inju Pro1Ll.b' .

o 710..Fai LaSfadaOSLO Moton to Act

0370 er nw Vaoai Sentence lJ 720 LarlMgmo;m Tr in Leding: Habea Corpus Relaton~ 380 Oter Poi 0 530 Gene 0 730 LarIgm

Prer Da 0 53S DePenaty Reporg &:o 385 Prpert Da 0 540 MiIl/ DiclosUl Ao

Produc Lift~ Otr 0 740 Ralway Lior ActIl~II .. _ 0 S50 Cill RighlB om Oter Lior

o 422 Apoa2S use 0 SSS Pr Codlon LigaiODIS8 079 EnL.,Ret Inc.042 Witwa28 S . Act,use IS7 0610 Agicul

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Disilites . Cl 64 R.R. &: Tnck (40'S(&)Emloy (J 650 Ailine 1lgs 0 S64 ssm 'Ilc XVI

Cl 44 Ammc: with 0 66 occ 0865 RBI 40SDi$iiilillei - Saety /HealthOter 0 690 Oter .

o 44 Ot CivilRighlS

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use 7609

"''''''''''ONLV,c._ ~ . 3 of; 9AF COMPLETING THE FRONT SIE OF FORM cr.71, COMPLETE THE INFRMTION REUESED BELOW.

CV.71 (OSI08)P/le 1 of2CIV COVER SHT.


UNITED STATES DISTRCT COURT, CENTRL DISTRICT OF CALIFORNIACIVIL COVER SHEET

VIII(a). IDENTICAL CASES: Has this action been previously fied in this court and dismissed, remanded or closed? rlNo DYesIf yes, list case number(s):

VIII(b). RELATED CASES: Have any cases been previously fied in this court that are related to the present case? D No "'YesIf yes, list case number(s): CV09-2901 PSG

Civil cases are deemed related if a previously fied case and the present case:

(Check all boxes that apply) ¡; A, Arise from the same or closely related transactions, happenings, or events; orliE. Cali for determnation of the same or substantially related or similar questions oflaw and fact; or

ri C, For other reasons would entail substantial duplication of labor if heard by different judges; or

D D, Involve the same patent, trademark or copyright, and one of the factors identified above in a, b or c also is present.

IX. VENUE: (When completing the following information, use an additional sheet if necessar,)

(a) List the County in this District; California County outside of this District; State if other than California; or Foreign Country, in which EACH named plaintiff resides,D Check here if the governent, its agencies or emplovees is a named plaintiff, If this box is checked, gO to item (b),

County in this Distrct:. California County outside of this Distrct; State, if other than California; or Foreign Country

ORANGE

(b) List the County in this District; California County outside of this Distrct; State if other than California; or Foreign Country, in which EACH named defendant resides.D Check here if the governent, its agencies or employees is a named defendant. !fthis box is checked, go to item (c),

County in this Distrct:. California County outside of this District; State, if other than California; or Foreign Country

NEW YORK

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

County in this District:. California County outside of this Distrct; State, if other than California; or Foreign Country

ORANGE

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

'7/J~~ ry~"41l/ 'Notice to Counsel/Partes: The CV-71 (JS-44) Civil Cover Sheet and the information contained herein neither replace nor supplement the fiing and service of pleadingsor other papers as required by law, This form, approved by the Judicial Conference of the United States in September 1974, is required pursuant to Local Rule 3- i is not filedbut is used by the Clerk of the Court for the purose of statistics, venue and initiating the civil docket sheet. (For more detailed instructions, see separate instrctions sheet.)

Date l- ?tJ lv, -zc/oX. SIGNATURE OF ATIORNEY (OR PRO PER):

Key to Statistical codes relating to Social Security Cases:

Nature of Suit Code Abbreviation Substative Statement of Cause of Action

861 HIA All claims for health insurance benefits (Medicare) under Title 18, Par A, of the Social Security Act, as amended,Also, include claims by hospitals. skiled nursing facilities, etc., for certifcation as providers of services under theprogram, (42 U,S,C, 1935FF(b))

862 BL All claims for "Black Lung" benefits under Title 4, Par B, of the Federal Coal Mine Health and Safety Act of 1969,

(30 U,S,C, 923)

863 DIWC All claim fied by insured workers for disability insurance benefits under Title 2 of the Social Security Act, asamended; plus all claims fied for child's insurance benefits based on disability. (42 U.S.C. 405(g))

863 DIWW All claims fied for widows or widowers insurance benefits based on disabilty under Title 2 of the Social SecurtyAct, as amended. (42 U,S.C. 405(g))

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

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

CV-71 (05/08) CIVIL COVER SHEET Page 20f2


UNITED STATES DISTRICT COURTCENTRA DISTRICT OF CALIFORNIA

NOTICE OF ASSIGNMENT TO UNITED STATES MAGISTRATE JUGE FOR DISCOVERY

This case has been assigned to Distrct Judge George King and the assigned discoveryMagistrate Judge is Charles Eick.

The cae number on all documents fied with the Cour should read as follows:

CViO- 3669 GHK (Ex)

Pursuant to General Order 05-07 of the United States Distrct Cour for the Central

District of Cai1fomia, the Magistrate Judge has been designated to hear discovery relatedmotions.

All discovery related motions should be noticed on the calendar of the Magistrate Judge

- - - - - - - - - - - - ~ ~ - - - _.. - - - - - - - - - - - - - - - - - - - -'- -- -- - - - - - --- - ---- - ------ ------ - - - ----_.NOTICE TO COUNSEL

A copy of this notice must be served with the summons and complaint on all defendants (if a removal action isfiled, a copy of this notice must be served on all plaintiffs).

Subsequent documents must be filed at the following location:

(Xl Western Division312 N. Spring St., Rm. G-8Los Angeles, CA 90012

LJ Southern Division LJ411 West Fourth St., Rm.1.053Santa Ana, CA 92701-4516

Eastern Division3470 Twelft St., Rm.134Riverside, CA 92501

Failure to file at the proper location will result in your documents being returned to you.

CV-18 (03/06) NOTICE OF ASSIGNMENT TO UNITED STATES MAGISTRATE JUDGE FOR DISCOVERY


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