California money manager Danny Pang temporarily stepped aside at his investment firm, which says it runs assets worth $4 billion, as federal civil and criminal officials began to look into allegations of impropriety.
In the civil inquiry, an attorney for a former president of Mr. Pang's firm -- Private Equity Management Group Inc. -- said he has been contacted by the Securities and Exchange Commission's Los Angeles office. The lawyer, Jeffrey Benice, said he will meet with the agency early next week. An SEC official declined to comment.
Federal criminal investigators are also looking at the firm, known as PEMGroup, a person familiar with that matter said Thursday. A spokesman for the U.S. attorney's office in Los Angeles didn't have any comment, nor did a spokeswoman for the Federal Bureau of Investigation's Los Angeles office.
PEMGroup, based in Irvine, Calif., was the focus of a Wall Street Journal article this week that said Mr. Pang's academic degrees and claim to have worked at Morgan Stanley couldn't be verified. The most serious allegation of improper behavior, leveled by the former PEMGroup president, Nasar Aboubakare, was that part of PEMGroup had been involved in a Ponzi scheme. PEMGroup strongly denied that and called other allegations fabrications. It also attacked Mr. Aboubakare as an ex-employee who had been terminated for taking kickbacks, and said that Mr. Pang stands by his credentials.
PEMGroup said Thursday its board had appointed a special committee to look into the allegations and had retained law firm Gibson, Dunn & Crutcher LLP to assist it. Mr. Pang voluntarily stepped aside as both chairman and CEO pending the outcome, PEMGroup said. Named interim chairman was Robert Anderson, formerly chief operating officer.
"PEMG takes very seriously the trust its clients have placed in it and as such, we intend to fully investigate allegations and issues raised," Mr. Anderson said in a statement provided by PEMGroup.
The firm said Chief Financial Officer Wilbur Quon also voluntarily stepped aside pending the outcome of the internal inquiry. A PEMGroup spokesman, Mike Sitrick, said last week that Mr. Quon is being investigated by the Internal Revenue Service for something related to a prior employer. It was unclear whether that contributed to Thursday's move. Mr. Quon, who hasn't been charged with anything, didn't return a call seeking comment, and an IRS official declined to comment.
The special committee will consist of Mr. Anderson and Sandra Chang, managing director, research and analytics.
PEMGroup raised most of its funds in Taiwan, where Mr. Pang, 42 years old, was born. The firm invests in U.S. assets such as company debt, time-share properties and life-insurance policies bought at discount.
Some of the Taiwanese banks that invested in PEMGroup say they're relying on insurance coverage that the California firm said it would buy to protect their principal and interest. It isn't clear how substantial that coverage is.
One of Mr. Aboubakare's allegations was that Mr. Pang asked him to create a fake insurance document to increase coverage. PEMGroup says it discovered the phony document only after Mr. Aboubakare had been fired and denies the firm or Mr. Pang had any role in faking it.
PEMGroup's main insurance coverage for its investors is provided by an affiliate the firm established in the British Virgin Islands, Fides Insurance Co. Asked how well Fides is capitalized, PEMGroup's spokesman said earlier this week that it met all statutory requirements in the British Virgin Islands and is audited annually. He said PEMGroup also bolsters its coverage with reinsurance.
One Taiwanese institution, Taichung Commercial Bank Co., said Thursday its PEMGroup investments were backed by German insurer Talanx AG. Talanx said its exposure is limited to $20 million. It couldn't be learned immediately whether PEMGroup has other reinsurance.
Taiwan's Financial Supervisory Commission said it is looking into the extent to which Taiwanese banks resold PEMGroup's financial products to investors. "We know we have banks that sell its products and are looking into the investments' structures -- and, most important of all, who takes the risks," said the head of the commission's Banking Bureau, Ming-Daw Chang.
Hua Nan Commercial Bank, a unit of Hua Nan Financial Holding Co., said in a statement it placed in a newspaper that PEMGroup products the bank sold to other investors were guaranteed for principal and interest by "large international financial institutions," which it didn't name. To be "prudent," the bank has asked lawyers to look into the contracts related to the products, the statement said. Two Hua Nan managers said the bank marketed about $200 million of structured notes linked to assets originated by PEMGroup.
Ting-I Tsai, Perris Lee Choon Siong and Rick Carew contributed to this article.