Former mortgage-lending president sentenced to 5 years in scheme

Mon, Jan. 24, 2005

Associated Press

SAN DIEGO - The former president of a mortgage-lending firm that cheated investors out of more than $330 million was sentenced Monday to five years and three months in federal prison.

U.S. District Judge Marilyn Huff also ordered Keith G. Grubba to pay restitution of more than $187 million, less any funds recovered by the government and a court-appointed receiver for the company. He must also serve five years of probation.

Grubba pleaded guilty in January 2003 to charges of conspiracy to commit wire fraud, conspiracy to commit money laundering, three counts of tax evasion and filing a false statement with the government. He agreed to cooperate with authorities in the prosecution of co-conspirators in the case, one of the largest investment frauds in San Diego County history.

Last year, former PinnFund USA chief Michael Fanghella was sentenced to 10 years in prison and five years of probation after pleading guilty to similar charges. Former chief financial officer John Garitta also has pleaded guilty for his role in the scheme and will be sentenced on March 7.

Investigators called PinnFund a Ponzi-type scheme, where old investors were paid with new investments and were kept in the dark with bogus financial statements showing 17 percent returns. About 160 individuals and small groups invested in PinnFund.

As investigators closed in on Fanghella's Carlsbad-based firm in March 2001, he fled to Barbados. A few months later he returned home to show his children "you don't run from your problems," he said, and he began cooperating with investigators.