SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 17343 / January 29, 2002
SEC v. J.T. Wallenbrock & Associates, Larry Toshio Osaki, Van Y. Ichinotsubo and Citadel Capital Management Group, Inc., Civil Action No. 02-00808 ER (C.D. CA).
The U.S. Securities and Exchange Commission ("Commission") announced today that a federal court in Los Angeles has entered an order temporarily enjoining J.T. Wallenbrock & Associates, Larry Toshio Osaki, Van Y. Ichinotsubo and Citadel Capital Management Group, Inc., from engaging in fraud, unregistered sales of securities, and acting as unregistered brokers, in violation of federal securities laws. The Order was entered with the consent of the Defendants, who neither admitted nor denied the allegations in the Commission's Complaint. The Court also froze the assets of the Defendants and required them to produce an accounting of the uses to which investors' funds have been made. The Commission's Complaint also asks the Court for orders of preliminary and permanent injunctions and other relief against the Defendants.
In its Complaint, the Commission alleges that the Defendants knowingly or recklessly made misrepresentations or omitted to state material facts in the offer and sale of promissory notes issued by Wallenbrock. Since at least 1999, the Defendants have raised at least $170 million through the offer and sale of three-month promissory notes promising a 20% return (for each three-month period), which were generally automatically rolled over upon maturity, to at least 1,000 investors throughout the United States. Many investors hold the notes in individual retirement accounts. The Complaint alleges that Defendants told investors that the proceeds of the notes would be used in Wallenbrock's "factoring" business in which Wallenbrock purchases receivables of Malaysian latex glove manufacturers for 70% to 80% of the balance due on the receivables. When the accounts receivable are collected, investors receive a 20% return on their investment. The Complaint alleges that, in the offer and sale of the Wallenbrock notes, the Defendants made material misrepresentations to investors that include: (1) the claim that the Wallenbrock notes are secured by an undivided interest in the accounts receivable of Wallenbrock; (2) the risks associated with the investments; and (3) the assurance of profits.
The Court's Order: (1) temporarily enjoins all Defendants from engaging in fraud or the sale of unregistered securities in violation of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; (2) and temporarily enjoins Osaki, Ichinotsubo and Citadel from acting as unregistered brokers in violation of Sections 15(a) and 15(c) of the Securities Exchange Act of 1934 and Rule 15c1-2 thereunder. The Court set a hearing on the Commission's motion for a preliminary injunction for April 1, 2002, at which time the parties will be allowed to present evidence supporting or opposing the motion.