U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 18446 / November 5, 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 on October 22, 2003, Larry T. Osaki ("Osaki") of Upland, California, and others, were indicted by a grand jury in the Central District of California for continuing to operate a Ponzi scheme after Osaki was already subject to a preliminary injunction in the SEC's action. The indictment charged Osaki with fourteen counts of securities fraud, twelve counts of mail fraud, nine counts of wire fraud, one count of obstruction of justice before the District Court issued a Temporary Restraining Order ("TRO") in the SEC action, two counts of obstruction of justice after the TRO, seven counts of money laundering and one count of criminal contempt.
The indictment charges that from at least 1997 until it was shutdown in early 2002, Osaki ran J.T. Wallenbrock & Associates ("Wallenbrock"), located in Pasadena, California, which purportedly offered investments in accounts receivable financing, also called factoring. Wallenbrock told investors that the company purchased the accounts receivable of latex glove manufacturing companies based in Asia and that investments would yield returns of 20 percent every 90 days. The indictment alleges that Wallenbrock did not purchase any accounts receivable and did not operate a factoring business. Instead, Osaki, and others, diverted and lost more than $100 million of investor money to improperly pay salaries to themselves, to fund high-risk start-up ventures and other businesses through Wallenbrock's sister company, Citadel Capital Management Group, Inc., and to make purported interest payments to investors. The indictment further alleges that Wallenbrock used investor funds to pay a portion of Osaki's restitution owed as a result of a prior felony grand theft conviction.
The indictment further alleges that, after the Central District of California entered a preliminary injunction in SEC v. J.T. Wallenbrock, et. al., Osaki, and others, relocated the Wallenbrock Ponzi scheme offshore and continued to run the same investment scam through a new company, Village Capital Trust, operated primarily out of Edmonton, Canada and Belize. The indictment further alleges that Osaki obstructed the SEC's investigation and subsequent court action.
On January 28, 2002, the Commission filed a civil complaint against Osaki and others in connection with the conduct described above. The complaint charged Osaki with violations of the antifraud, broker-dealer registration and securities registration provisions of the federal securities laws. Osaki was preliminarily and permanently enjoined, by consent, from further violations of these provisions. The Court will later determine a pending motion for disgorgement and civil penalties against Osaki and others. For further information, see Lit. Rel. Nos. 17343, 17381 and 18011.
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