A WSJ Tour de Force

A Wall Street Journal investigation paints a devastating portrait of a financier and shows the paper's deep-reporting powers are far from gone

The Wall Street Journal drops an incredible story on its page one today. It’s one of the best stories I’ve read in a long time.

And it’s written by a reporter/editor Audit readers will remember: Mark Maremont, whom I interviewed a couple of months ago.

This has to have been one of the most heavily lawyered stories in years. It’s about an immigrant private-equity guy named Danny Pang, who’s left a long trail of deceit and shadiness, which the Journal and Maremont don’t shy away from detailing.

There are the accusations of a Ponzi scheme, the alleged embezzling of $3 million, the made-up résumé, the life-insurance battle after the hitman-style murder of Pang’s wife, the fraud accusations, the kickback-taking business partners, the prostitutes, the attempted bribes, and the devastating personality critiques that complete the Journal’s portrait of a consummate conman.

Helluva story, no? Yes. Don’t be surprised if Maremont gets a movie or a book deal out of this one.

Here’s one of the scams Pang tried to pull on an insurance company, according to an ex-employee, Nasar Aboubakare:

In early 2007, he says, a PEMGroup affiliate called GVEC Resource IV bought a $31.6 million policy from a unit of HCC Insurance Holdings Inc. to cover investments in time-share properties. But because the policy wasn’t large enough, Mr. Aboubakare says, Mr. Pang directed him and another executive to create a phony document raising the covered amount to $108 million. Mr. Aboubakare says he personally showed this fake policy to investors and sent it to PEMGroup’s Taiwan office.

HCC, shown documents, confirmed that the $31.6 million policy was genuine but said the $108 million policy was not. “It looks to me like a forgery,” an HCC official said.

The Journal’s problem here, one that must have been fretted over internally, is its reliance on dodgy characters as sources. Pang’s firm PEMGroup fired Aboubakare, it says, for sexual misconduct (Aboubakare admits an internal affair) and for taking a $3 million kickback (something Aboubakare also admits, though he says he wasn’t fired for months). The source-credibility problem here is one that’s probably inevitable with a character like Pang. Thugs don’t surround themselves with Boy Scouts, after all.

But as seen in the excerpt above, the paper has documentary evidence, and much of the allegations it is reporting on are from arbitration filings by Aboubakare against SEMGroup (Applaud the Journal for prominently linking to several of them on its website). Still, this stuff is not for the faint of heart.

The color is rich and helps to round out our view of Pang:

On July 12, 2007, Mr. Pang used the jet to take a group of women from PEMGroup’s California offices to Las Vegas for a party. Mr. Aboubakare says that on the return flight the next day, Mr. Pang, having won at a casino, “had a briefcase stuffed with cash and he started throwing money to the girls, stacks of $10,000. I thought it wasn’t right to treat the girls from the office that way, like we were pimps and gamblers.”

That paragraph is followed by an instant-classic PR response:

PEMGroup’s spokesman confirmed the firm took the women to Las Vegas — “as a reward for good work” — and said Mr. Pang “did show them his winnings.”

Yet even after all the nasty stuff that made it into the story, you get the feeling reading this that the Journal knows more or suspects more than it can print, something not uncommon in these types of stories. For instance, the Journal mentions a couple of times that PEMGroup paid investors higher-than-market rates:

Starting with its first fund in 2004, PEMGroup has raised hundreds of millions of dollars through Taiwanese banks. It offers them notes that pay above-market interest, notes the banks can reoffer to individual clients.

Aboubakare alleges that PEMGroup couldn’t cover the high interest and had to raise more money to pay off existing investors—a Ponzi scheme. Sound at all reminiscent of Stanford Financial?

Look at the great stuff Pang invested the proceeds in, too:

PEMGroup also invests in U.S. time-share properties and buys the rights to payouts on life-insurance policies…

Part of PEMGroup’s business is buying life-insurance policies from older people at a discount, collecting after they die. But a problem arose in 2007, Mr. Aboubakare says, when policies weren’t paying off at the projected rate — “everybody lived a long time.”

That last sentence ought to wave a red flag for readers, regulators, and lawmakers. There’s a cottage industry where investors buy people’s life insurance policies at discounts, betting they’ll die before the investors lose money paying the premiums. That kind of incentive can’t be good, right?

Which leads us to the death of Pang’s wife:

Janie Louise Pang, who was 33, had worked on and off as a stripper. She had married at 16 and had two children before she married Mr. Pang.
That marriage evidently was stormy. The police were called to their home four times for domestic-disturbance complaints, including a 1993 incident in which Ms. Pang said she was afraid Mr. Pang “was going to kill her.”
She also told police her husband had drained value from her parents’ home and spent it on “gambling, women, alcohol, etc.” She said Mr. Pang once had broken her nose, forced her to withdraw $70,000 from the bank and gambled it away in one night…
In May 1997, Ms. Pang hired an investigative agency, which, according to court records, observed her husband holding hands with another woman. The next day, Ms. Pang was scheduled to meet with the investigator at noon. Shortly before that, the doorbell rang at the Pangs’ home. According to court records, the family’s maid heard Ms. Pang, her 5-year-old at her side, answer the door and begin talking to the visitor, who asked if she was “Miss Pang.”
She then began screaming. The maid saw her run through the house, chased by an elegantly dressed man carrying a briefcase and holding a gun. As Ms. Pang cowered in a closet, he shot her dead.

That’s from an also-excellent sidebar story looking Ms. Pang’s murder.

And it even has a life-insurance angle:

While police investigated the sensational murder, Mr. Pang, who had been out of town at the time, tussled with others over control of $750,000 in proceeds from his wife’s life insurance. The beneficiaries were her son and daughter by her first husband.

Swell guy. Folks, you can’t make this stuff up. Like the second classic PR response from Mr. Pang’s flack about the history of wife-beating calls to the police (emphasis mine):

Mr. Pang, through a spokesman, denied any of these events took place and said any police reports of abusive conduct refer to a different Danny Pang.

I wish the Journal had named this spokesman (UPDATE: A sharp-eyed reader points out that the paper does name the flack: LA disaster PR specialist Michael Sitrick. My mistake, and yet another reason to love this story.) He deserves to be publicly shamed. PR people are supposed to have ethics, too (really!). But even though the flackery was transparently pathetic, the Journal drives a stake through it:

But the reports include the Pangs’ correct birth dates. Mr. Pang didn’t face any charges because of the calls.

And someone actually got tried for Ms. Pang’s murder:

Four years after the murder, police arrested a suspect, who had drawn suspicion because he knew Mr. Pang and, days after the murder, had faked a suicide off the Golden Gate Bridge. When the man went on trial in 2002, the defense tried to point the finger at Mr. Pang instead, introducing a police and Federal Bureau of Investigation memo saying Mr. Pang shouldn’t be ruled out as a suspect and might have ties to Taiwanese organized crime.

Pang plead the Fifth Amendment in his wife’s murder trial.

See what I mean about the sure-to-come Hollywood thriller?

The Journal also gets some nasty dirt on white-shoe law firm Fulbright & Jaworski. It offered a “settlement” (honk) of $500,000 to Aboubakare to get him to not talk to the Journal. Incredible.

The lawyer drafted a letter for Mr. Aboubakare to send the Journal. In it, he was to say that his statements to the Journal and to Mr. Minkow were false and that he had made them partly because stress “affected my judgment and mental well-being.”

I’m assuming PEMGroup had a nasty little run on the bank today.

The Journal has diminished its emphasis on long-form, in-depth reporting under Rupert Murdoch’s ownership, but this kind of story shows that it’s far from gone. Maremont shows the greatness the paper’s still got in it.

It’s a dirty word for Murdoch and Robert Thomson, but dare I say this story is Pulitzer material?

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.