U.S. Securities and Exhange Commission
Litigation Release No. 17381 / February 26, 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 entered an order on February 21, 2002, appointing James H. Donell as the Receiver of J.T. Wallenbrock & Associates and Citadel Capital Management Group, Inc. for the benefit of investors. The court granted Mr. Donell the power to:
The Court further ordered Wallenbrock and Citadel to transfer to the Receiver all assets, funds and other property that they hold in foreign locations within ten days from the date of the order. The Receiver may be reached at (310) 207-8481.
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.
In filings with the Court, the Commission alleged that appointment of a receiver was necessary because, among other things:
The Court issued a temporary restraining order and asset freeze against the Defendants on January 28, 2002, and 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.