COURT GRANTS SUMMARY JUDGEMENT IN MRI INTERNATIONAL INC., PONZI SCHEME

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23111 / October 10, 2014

Securities and Exchange Commission v. Edwin Yoshihiro Fujinaga and MRI International, Inc., et al., Civil Action No. 2:13-CV-1658 JCM (CWH) (D. Nev.)

SEC Obtains Summary Judgment Win On Liability in Ponzi Scheme Case

On October 3, 2014, the Honorable James C. Mahan, United States District Judge for the District of Nevada, granted the Securities and Exchange Commission's motion for summary judgment on liability against defendants Edwin Fujinaga and MRI International, Inc. on all charges against them, including violations of the antifraud provisions of the federal securities laws.

In a case originally filed on September 11, 2013, the SEC alleged that Fujinaga and his company, MRI, perpetrated an elaborate Ponzi scheme designed to misappropriate money from investors. The SEC alleged that the defendants raised more than $800 million from thousands of investors living primarily in Japan under the ruse that MRI was using their investments to buy medical accounts receivable from medical providers at a discount to recover their full value from insurance companies. The SEC alleged that the defendants used the investments to pay back earlier investors, and that Fujinaga used investor funds for his own purposes, including to buy property and luxury cars. In granting summary judgment in favor of the SEC, the court found that "Fujinaga had sole control over investment funds, using them for his own personal benefit" and, "[w]hile depleting the pool of collected investments, Fujinaga facilitated a Ponzi scheme funded by new investments."

The court's summary judgment opinion finds that Fujinaga and MRI violated Sections 17(a)(1), (2), and (3) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The court has not yet determined the appropriate relief against the defendants, and the litigation is ongoing for remedies purposes. The SEC's case is also continuing against multiple relief defendants, who the SEC alleges received and used investors' funds.

For further information, please see Litigation Release Number 22832 (October 3, 2013) [SEC Obtains Asset Freeze and Other Emergency Relief in Ponzi Scheme Targeting Investors in Japan].

The SEC appreciates the assistance of the Financial Services Agency of Japan and the Securities and Exchange Surveillance Commission of Japan in this matter.

COURT SHUTS TAX PREPARER DOWN IN FICTITIOUS BUSINESS EXPENSES CASE

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, September 30, 2014

Federal Court Shuts Down Florida Tax Return Preparer

The U.S. District Court for the Southern District of Florida permanently barred Marvel Angelita Ebanks, a tax preparer who prepared returns in Palm Beach County, Florida, and her company, Marvelous Enterprises Inc., from preparing federal tax returns for others, the Justice Department announced today.  A final judgment of permanent injunction was entered against Ebanks and her company by the court today.

The complaint alleged that Ebanks and her company prepared federal income tax returns for customers that claimed ficticious business expenses.  In addition, Ebanks and her company prepared returns that claimed false or inflated education credits and child care credits, and other deductions and/or credits in order to unlawfully understate tax liabilities and generate larger than warranted refunds.  Pursuant to the final judgment of permanent injunction, Ebanks and her company are permanently enjoined from preparing or assisting in the preparation or filing of federal tax returns and amended returns.

Return-preparer fraud is one of the IRS’ Dirty Dozen Tax Scams for 2014.  The IRS has some tips on their website for choosing a tax preparer.  In the past decade, the Tax Division has obtained injunctions against hundreds of fraudulent tax preparers.  Information about these cases is available on the Justice Department website.  An alphabetical listing of persons enjoined from preparing returns and promoting tax schemes can be found on this page.  If you believe that one of the enjoined persons or businesses may be violating an injunction, please contact the Tax DivisionEmail links icon with details.

JAPANESE COMPANY TO PLEAD GUILTY TO PRICE FIXING FOR SHIPPING SERVICES

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, September 26, 2014

Japanese Company Agrees to Plead Guilty to Price Fixing on Ocean Shipping Services for Cars and Trucks

Kawasaki Kisen Kaisha Ltd. (K-Line), a Japanese corporation, has agreed to plead guilty and to pay a $67.7 million criminal fine for its involvement in a conspiracy to fix prices, allocate customers, and rig bids of international ocean shipping services for roll-on, roll-off cargo, such as cars and trucks, to and from the United States and elsewhere, the Department of Justice announced today.

According to a one-count felony charge filed today in U.S. District Court for the District of Maryland in Baltimore, K-Line conspired to suppress and eliminate competition by allocating customers and routes, rigging bids and fixing prices for the sale of international ocean shipments of roll-on, roll-off cargo to and from the United States and elsewhere, including the Port of Baltimore.  K-Line participated in the conspiracy from at least as early as February 1997 until at least September 2012.  K-Line has agreed to cooperate with the Department’s ongoing antitrust investigation.  The plea agreement is subject to court approval.

Roll-on, roll-off cargo is non-containerized cargo that can be both rolled onto and rolled off of an ocean-going vessel.  Examples of this cargo include new and used cars and trucks and construction and agricultural equipment.

“Our efforts exposed a long-running global conspiracy that operated globally, affecting the shipping costs of staggering numbers of cars, into and out of the Port of Baltimore, and other ports in the United States and across the globe.  Today’s announcement demonstrates our continuing resolve to bring the members of this conspiracy to justice. ” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “We are continuing our efforts to ensure that both the corporations and individuals involved in this cartel are held accountable for their acts and the harm they inflicted on American consumers.”

According to the charge, K-Line and its co-conspirators conspired by, among other things, agreeing – during meetings and communications – on prices, allocating customers, agreeing to refrain from bidding against one another and exchanging customer pricing information.  The department said the companies then charged rates in accordance with those agreements for international ocean shipping services for certain roll-on, roll-off cargo to and from the United States and elsewhere at collusive and non-competitive prices.

K-Line is charged with price fixing in violation of the Sherman Act, which carries a maximum penalty of a $100 million criminal fine for corporations.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Today’s charge is the result of an ongoing federal antitrust investigation into price fixing, bid rigging, and other anticompetitive conduct in the international roll-on, roll-off ocean shipping industry, which is being conducted by the Antitrust Division’s Washington Criminal I Section and the FBI’s Baltimore Field Office, along with assistance from the U.S. Customs and Border Protection Office of Internal Affairs, Washington Field Office/Special Investigations Unit.