Keith G. Grubba, former president of PinnFund, USA, was sentenced Monday in U.S. District Court in San Diego to 63 months in prison, followed by five years of supervised release, for his role in a mortgage business that masked one of the largest Ponzi schemes in San Diego County history.
U.S. District Judge Marilyn L. Huff ordered Grubba to pay $187 million in restitution.
In January 2003, Grubba pled guilty to one count of conspiracy to commit wire fraud, one count of conspiracy to commit money laundering, three counts of tax evasion, and one count of filing a false statement with the Department of Housing and Urban Development. He also agreed to cooperate with authorities in the investigation and prosecution of other co-conspirators.
In total, Grubba and co-conspirators fraudulently obtained more than $330 million in investor funds, rendering it one of the largest fraud schemes in the history of the Southern District of California, according to a U.S. Attorney’s office.
Former PinnFund CEO Michael Fanghella and former CFO John Garitta have also pled guilty to charges similar to those to which Grubba pled guilty. Fanghella previously was sentenced to 120 months in prison. Garitta is scheduled to be sentenced before Judge Huff on March 7.
Authorities say Fanghella and an associate promised 160 investors double-digit returns for the more than $300 million they put into PinnFund to fund mortgage loans, according to a San Diego Union-Tribune report. But the money instead went to cover operating losses, and to provide previous investors with their monthly returns.
The scheme unfolded in 2001 after the U.S. Securities and Exchange Commission filed a lawsuit against the company alleging fraud.
U.S. Attorney Carol C. Lam said, “Corporate executives should know that they will pay a price for stealing from investors.”
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