SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 16941 / March 22, 2001
SECURITIES AND EXCHANGE COMMISSION v. PINNFUND USA, INC., PEREGRINE
FUNDING, INC., ALLIED CAPITAL PARTNERS, GRAFTON PARTNERS, SIX SIGMA,
LLC A/K/A 6 SIGMA, LLC, MICHAEL J. FANGHELLA, JAMES L. HILLMAN,
RELIANCE HOLDINGS, LLC, AND KELLY COOK A/K/A KELLY JAYE A/K/A KELLY
SPAGNOLA (S.D.Cal.)
Civil Action No. 01 CV 0496 H (LAB)
The United States Securities and Exchange Commission ("Commission")
announced that on March 21, 2001, the Honorable Marilyn L. Huff,
United States District Judge for the Southern District of California,
issued a temporary restraining order regarding an ongoing $276 million
securities fraud by Michael J. Fanghella ("Fanghella") and James L.
Hillman ("Hillman") and entities controlled by them. The Court (1)
scheduled a hearing on the Commission's application for a temporary
restraining order and receiver for March 22, 2001, at 10 30 a.m.; (2)
prohibited the destruction of documents by the defendants; (3)
prohibited the transfer of assets or property by the defendants to a
foreign location; and (4) granted expedited discovery.
The Commission's complaint, filed on March 21, 2001, alleges that
since 1993, Fanghella, Hillman, PinnFund USA, Inc. ("PinnFund") and
entities controlled by Fanghella and Hillman (Peregrine Funding, Inc.,
Allied Capital Partners, Grafton Partners and Six Sigma, LLC aka 6
Sigma, LLC) (collectively, the "Funding Entities") have raised at
least $276 million from at least 166 investors, purportedly for the
purpose of funding PinnFund's business of writing residential home
mortgages. In fact, Fanghella, Hillman, PinnFund and the Funding
Entities are misappropriating the funds raised by the Funding Entities
and are using the funds to finance Fanghella's lavish lifestyle,
including the use of at least $10 million in investor funds to buy a
$5 million home, furnishings and other accessories for his girlfriend.
In addition, the complaint alleges that Fanghella, Hillman, PinnFund
and the Funding Entities have circulated altered financial statements
of PinnFund and forged auditors' reports, which contain numerous
fraudulent misrepresentations and omissions, conceal more than $95
million in losses incurred by PinnFund since 1997 and conceal the
transfer of more than $107 million to Fanghella since 1997.
The Commission applied to the Court for an order temporarily
restraining Fanghella, Hillman, PinnFund and the Funding Entities from
committing securities fraud in violation of Section 17(a) of the
Securities Act of 1933 ("Securities Act"), Section 10(b) of the
Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5
thereunder. The Commission also requested that Hillman and the Funding
SNIPPETS:
SECURITIES AND EXCHANGE COMMISSION v. PINNFUND USA, INC., PEREGRINE
FUNDING, INC., ALLIED CAPITAL PARTNERS, GRAFTON PARTNERS, SIX SIGMA, LLC A/K/A 6 SIGMA, LLC,
The United States Securities and Exchange Commission announced that on March 21, 2001, the
The Court scheduled a hearing on the Commission's application for a temporary restraining
In fact, Fanghella, Hillman, PinnFund and the Funding Entities are misappropriating the funds
In addition, the complaint alleges that Fanghella, Hillman, PinnFund and the Funding Entities
The Commission applied to the Court for an order temporarily restraining Fanghella, Hillman,
The Commission also requested that Hillman and the Funding Entities be temporarily restrained
In addition to the interim relief granted today and the relief sought through the
The Commission also seeks an order temporarily freezing the assets of relief defendants
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