Federal Judge Marilyn Huff sentenced another key defendant in the largest corporate fraud case in San Diego’s history to five years and three months in prison and five years’ probation.
Keith G. Grubba, former president of PinnFund USA, Inc., had pleaded guilty to six felony counts, including wire fraud, money laundering and tax evasion, for his role in bilking about $330 million of investor funds from the now-defunct Carlsbad-based, sub-prime mortgage bank.
Grubba’s sentence, handed down by Huff on Jan. 24 in U.S. District Court in San Diego, also included an order to pay $187.6 million in restitution to the court-appointed receiver for the company.
Grubba, 41, told prosecutors in his guilty plea in January 2003 that he conspired with other top PinnFund executives to set up a Ponzi scheme, essentially taking money from new investors to pay promised double-digit returns to earlier investors in a mortgage bank.
The scheme was the target of a federal investigation beginning in March 2001 and caused former Chief Executive Officer Michael Fanghella to flee the country later that year.
Fanghella, 53, surrendered to authorities in August 2001, pleaded guilty to multiple felonies, and was sentenced in 2003 to 120 months in prison.
Several other top PinnFund officials have also pleaded guilty and have been sentenced.
In addition to the scope of the fraud, the PinnFund case made headlines because of Fanghella’s lavish spending, including buying a home, cars and other gifts for his then-girlfriend, a former porn actress.
Federal prosecutors allege Fanghella set up the Ponzi scheme with the help of James Hillman, a PinnFund executive who induced investors to put their money into the company. Hillman has denied the charges and is awaiting trial.
Mike Allen
