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U.S. SECURITIES & EXCHANGE COMMISSION

Litigation Release No. 18011 / March 3, 2003

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. CAL. Filed January 29, 2002).

The U.S. Securities and Exchange Commission ("Commission") announced today that a federal court in Los Angeles entered an order on February 28, 2003, permanently enjoining Wallenbrock & Associates ("Wallenbrock"), a general partnership located in Pasadena, California, Larry T. Osaki ("Osaki") of Upland, California, Van Y. Ichinotsubo ("Ichinotsubo") of Cerritos, California, and Citadel Capital Management Group ("Citadel"), a Nevada corporation located in Pasadena, California, by consent, from violations of the antifraud, broker-dealer registration and securities registration provisions of the federal securities laws.

In Court filings, the Commission alleges that since at least 1999, the Defendants raised at least $230 million through the offer and sale of unregistered three-month promissory notes promising a 20% return for each three-month period, which were automatically rolled over upon maturity, to at least 1,000 investors throughout the United States. The Complaint alleges that Defendants fraudulently misrepresented to investors that their money would be used to generate profits in Wallenbrock's receivables "factoring" business in which Wallenbrock supposedly purchased discounted receivables of Malaysian latex glove manufacturers. The Commission further alleges in its filings that, in reality:

  • Defendants secretly engaged in a massive Ponzi scheme, using at least $100 million received from investors to pay other investors and create an illusion that there was a receivables business;

  • At least $130 million of investors' funds was transferred to Citadel to invest in high-risk start-up businesses, without disclosure to investors;

  • Defendants admitted these fraudulent uses of investors' funds in their Accounting submitted to the Court;

  • Osaki prepared and maintained "Larry's Black Books" in which he kept track of these fraudulent uses of the investors' money on a daily basis; and

  • Defendants failed to tell investors that both Osaki and Wallenbrock filed for bankruptcy in 1991, that Osaki was convicted of felony grand theft and that investors' funds were deposited into Osaki's personal account shared jointly with his wife and J.T. Wallenbrock.

In consenting to the injunction, the Defendants did not admit or deny the allegations in the Complaint. The Court will later determine what amounts Defendants should be ordered to pay in disgorgement of ill-gotten gains and civil penalties upon further motion and hearing, where the Defendants will be precluded from arguing that they did not violate the federal securities laws.

The Court's Order: (1) permanently 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 permanently enjoins Osaki, Ichinotsubo and Citadel from acting as unregistered brokers in violation of Section 15(a) and violating the antifraud provisions of Section 15(c) of the Securities Exchange Act of 1934 and Rule 15c1-2 thereunder.

See Lit. Rel. Nos. 17343 and 17381.

 

http://www.sec.gov/litigation/litreleases/lr18011.htm


Modified: 03/04/2003