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United States v. Fujinaga

United States District Court, D. Nevada

June 17, 2019

UNITED STATES OF AMERICA, Plaintiff,
v.
EDWIN FUJINAGA, Defendant.

          ORDER ON RESTITUTION AND FINAL ORDER OF FORFEITURE

          Gloria M. Navarro, Chief Judge

         Before the Court is the Government's Proposed Final Order on Forfeiture, (ECF No. 332), to which Defendant Edwin Fujinaga (“Defendant”) filed a Response, (ECF No. 324). The Court orders forfeiture against Defendant as explained below.

         I. PROCEDURAL HISTORY AND FACTUAL FINDINGS

         The Grand Jury returned a Criminal Indictment against Defendant on July 8, 2015, charging him with Counts 1 through 8 of mail fraud in violation of 18 U.S.C. §§ 1341 and 2; Counts 9 through 17 of wire fraud in violation of 18 U.S.C. §§ 1343 and 2; and Counts 18 through 20 of monetary transactions in property derived from specified unlawful activity in violation of 18 U.S.C. §§ 1957 and 2. (Indictment, ECF No. 1).

         The Criminal Indictment includes several forfeiture allegations. The First Forfeiture Allegation included Counts 1 through 8 for a criminal forfeiture money judgment of $1, 559, 335, 710.94 under 18 U.S.C. § 981(a)(1)(C) with 28 U.S.C. § 2461(c). (Id. 8:5-9:12). The Second Forfeiture Allegation included Counts 9 through 17 for a criminal forfeiture money judgment of $1, 559, 335, 710.94 under 18 U.S.C. § 981(a)(1)(C) with 28 U.S.C. § 2461(c). (Id. 9:13-10:20). The Third Forfeiture Allegation included Counts 18 through 20 for a criminal forfeiture money judgment of $116, 346.65 under 18 U.S.C. § 981(a)(1)(A) with 28 U.S.C. § 2461(c), 18 U.S.C. § 981(a)(1)(C) with 28 U.S.C. § 2461(c), and 18 U.S.C. § 982(a)(1). (Id. 10:21-12:4).

         On November 27, 2018, a jury found Defendant guilty on Counts 1 through 20 of the Indictment. (Indictment, ECF No. 1); (Trial Minutes, ECF No. 262); (Jury Verdict, ECF No. 267). In the case of United States v. Edwin Fujinaga, et al, 2:15-CR-198-GMN-NJK, the Court finds that the Government has proven by preponderance of the evidence the following:

         MRI International Inc. (MRI) is a Nevada Limited Liability Corporation, operated in Las Vegas, Nevada. (Indictment, ECF No. 1); (Presentence Investigation Report (PSR), p. 4-5). Defendant owned and controlled MRI as its President and Chief Executive Officer. MRI operated a Service Center located in Tokyo, Japan. Defendant operated a scheme and artifice to defraud as set forth in the PSR, p. 4-5, ¶ 7-16.

         Although MRI began business operations in 1998, beginning as early as 2009 and continuing through April 2013, Defendant made, and caused to be made, numerous material misrepresentations and omissions in an effort to fraudulently obtain money from investors investing in MRI. To develop the fraudulent scheme, Defendant represented that MRI engaged in the business of purchasing medical accounts receivable (MARS), which are debts owed by recipients of medical services or products to the individuals or entities that provided those services. Defendant represented that MRI purported to purchase the accounts from providers at a discounted rate and then collect on the accounts from the patients owing money. Furthermore, it was represented that MRI's profit from this activity was generated from the difference between the price at which MRI purchased the MARS and the amount MRI collected on them due to MRI's purportedly superior collections capability.

         In furtherance of the scheme and artifice, Defendant solicited investments in MRI by offering Certificates of Investment, claiming to provide investors with consistent, predictable returns resulting from their superior collections ability. Bearing a face value equal to the amount of the initial investment, the Certificates of Investment promised a series of interest payments which would accrue and be paid, along with the principal, when the Certificates of Investment reached a specified maturity date. When the Certificates of Investment reached maturity, investors were given the option to reinvest the total amount due and owing into a new Certificate instead of receiving a cash payment of the amount they were due.

         In efforts to continue the fraudulent scheme, Defendant fraudulently induced investments by knowingly publishing, mailing, distributing, and transmitting promotional materials which falsely represented that MRI would use any money invested in the Certificates of Investment exclusively to purchase MARS, the purported profitable business of MRI. Defendant also falsely represented to investors that investment money would be held and managed by an independent, third-party escrow agent in Nevada using a “lock box” method that prevented MRI, or anyone else, from expending investment money for any purpose other than the purchase of MARS.

         Investigating agents determined that, despite representations made by Defendant, Defendant routinely used investors funds for personal enrichment and operating expenses rather than the intended purchase of MARS. Defendant employed numerous false, fraudulent, deceptive, and deceitful representations as necessary to advance the fraudulent scheme, conceal fraudulent activities from others, avoid detection, and enrich himself. The fraudulent scheme caused many investors irreparable financial harm.

         Throughout the charged time frame of the fraudulent scheme and artifice, Defendant used the United States Postal Service and other private and commercial interstate carriers to send and receive documents in furtherance of the fraudulent scheme. In addition, electronic wire transfers were used to send funds between bank accounts used by Defendant. During the course of the fraudulent scheme, Defendant laundered fraudulent funds through various financial institutions.

         A substantial number of the victim investors were elderly individuals that invested in the fraudulent scheme. Many of those victims were significantly impacted, causing them to reenter the work force to sustain a living. (PSR, p. 5-8); (Indictment, ECF No. 1); (Trial Minutes, ECF No. 262); (Jury Verdict, ECF No. 267).

         From 2000 to 2013, Sterling Escrow was MRI's depository of funds disbursement agent that managed two of MRI's bank accounts Sterling Escrow designated as Class A and Select A. These accounts were not like regular escrow accounts or regular trusts. Sterling Escrow only had a contract with MRI and did not have a contract with the victims, unlike a regular escrow or trust. The individual Japanese victims transferred money to Sterling Escrow Class A and Select A. Defendant transferred the victims' money from Class A and Select A into the MRI holding accounts so MRI could buy medical receivables. When Defendant instructed Sterling Escrow to disburse the money from MRI bank accounts of designated Class A, Select A, and the MRI holding accounts, Sterling Escrow transferred the funds to where Defendant directed. Defendant did not have to prove anything nor show the money would purchase MARS. (See November 7, 2018, morning session, Trial Transcript (11/7 MSTT), p. 74-106, 125-126, 130); (November 7, 2018, afternoon session, Trial Transcript (11/7 ASTT), p. 139-93); (November 19, 2018, Trial Transcript (11/19 TT), p. 34-35); (Exhibits (Ex.) 38, 80, 111A, 111B, 185, 241, 242, 243, 265, 266, 267, 450476).

         The MRI bank accounts Sterling Escrow designated as Class A or Select A were not lockboxes. The money could be moved out of Sterling Escrow designated Class A, Select A, and the MRI holding accounts without MARS of equivalent value being purchased. Contrary to what Defendant told victims, MRI's expenses were not paid out of net revenue (i.e., the money left over after MRI's victims were paid their interest). Instead, from 2000 to 2013, Defendant used victims' money managed by Sterling Escrow in the Class A, Select A, and the MRI holding accounts to pay interest to previous victims, to pay Defendant's personal expenses, to pay for Defendant to set up companies and to buy companies, and to pay operating expenses for Defendant's companies. Defendant caused all the money in Select A to be transferred to Class A. Defendant instructed Sterling Escrow to transfer Class A money to MRI general account that is not a lock box. (11/7 MSTT, p. 84-90, 130-31); (11/7 ASTT, p. 139-93); (11/19 TT, p. 34-35); (Ex. 38, 80, 111A, 111B, 185, 241, 242, 243, 265, 266, 267, 450, 476).

         All money paid from CSA Service Center account came from MRI General account that came from Class A, Select A, and the MRI holding accounts that came from the Japanese victims. (11/8 TT, p. 25-27); (Ex. 227). For example, Defendant used the victims' funds to pay the bills of Hoy's, The Factoring Company, and Harmon Primary Care, and used the funds to pay for the use of a private jet with Bombardier. Personal expenses included a BMW car lease, American Express balances, alimony payments to Defendant's ex-wife, a Bugatti, a McLaren, a Ford GT, a Shelby, a Bentley, a boat, a horse trailer, payments to Red Rock Country Club, payments to Isabelle Castillo Gardening Services. (Id.); (11/7 ASTT, p. 196-207); (11/8 TT, p. 21-25, 27-28); (11/19 TT, p. 34-35, 54-58); (Ex. 47, 219, 220, 227, 228, 230, 248, 263, 402, 403, 450, 455, 463, 464, 465, 466, 470, 471, 476).

         Defendant used the victim's funds to purchase medical businesses among others: Anaheim; Huntington Beach, Ontario; Four Seasons Surgery Center, Encino; Harmon Medical Center; Med-Health Pharmaceutical: Hoy's pharmaceutical; One Stop Pharmacy Corporation, Med-Health Medical Supplies. (11/8 TT, p. 30-39, 46-57); (Ex. 217, 223, 237, 239, 476, 477). Defendant caused “buys and sweeps” of his company account receivables with MRI. No. profits were made because the “buy and sweeps” were similar amounts. (11/8 TT, p. 43-84); (Ex. 73, 75, 106 A, 106B, 109, 188, 207, 217, 223, 235, 237, 253, 265, 477).

         The last time Defendant purchased medical receivables from an outside company not connected to Defendant was 1999 or 2000, where he purchased three of them. (11/8 TT, p. 38-39). Defendant wanted to raise $100, 000, 000 from October to December 2009 to fund a pharmaceutical company and to establish a volume purchasing program with Defendant's factories so Defendant could buy his own receivables. (11/8 TT, p. 39-45); (Ex. 75).

         From January 2009 to May 2013, the collection on MARS was $476, 000. (11/19 TT, p. 49-54); (Ex. 247, 249, 450, 462). Defendant returned $476, 000 to MRI general account from the collection on MARS. At the same time Defendant paid interest back to the victims in the amount of $66, 900, 000 for 2010 and $72, 800, 000 for 2011. (11/19 TT, p. 52-54); (Ex. 247, 249, 462). For 2010, Defendant would have had to collect approximately $743, 000, 000 to pay that amount of interest to the victims. For 2011, Defendant would have had to collect approximately $800, 000, 000 to pay that amount of interest to the victims. (11/19 TT, p. 52-54); (Ex. 247, 249, 462).

         Michael Petron is a forensic accountant, a certified public accountant, and a certified fraud examiner, and he examined the Class A, Select A, and the MRI holding accounts which held the victims' money that Defendant fraudulently obtained. (11/19 TT, p. 18-21, 34-35); (Ex. 364, 450). Petron examined numerous bank records and the MAS 90 database. (11/19 TT, p. 21-22, 33); (Ex. 267, 300-309, 310A, 310B, 311-363, 366A, 366B, 366C, 366D, 366E, 367-390). The MAS 90 database was accurate with only $225, 000 of $400, 000, 000 in the database that was not supported by the bank records. (11/19 TT, p. 23-29, 32); (Ex. 267, 400). Petron examined a detailed table from MRI that tracked the victims' deposits and rollovers, detailing everything about the victims starting in January 1, 2008. (11/19 TT, p. 32-33); (Ex. 364). The outstanding balance of money owed to victims based on the outstanding certificates was approximately $1, 600, 000, 000. This amount represents both actual principal invested and accrued interest that was rolled over into new investment certificates. (11/19 TT, p. 60-68); (Ex. 249, 450, 472, 473, 474, 475, 505, 506).

         Defendant fraudulently obtained, acquired, or possessed $813, 181, 566 from the Japanese victims' payments into Class A, Select A, and the MRI holding accounts. Defendant used the $813, 181, 566 to pay interest back to the earlier victims, to pay MRI payroll, and for personal use: to pay alimony to his ex-wife and others; to buy companies; to pay his other companies' bills, including, but not limited to, The Factoring Company; Hoy's Pharmaceutical; Harmon Primary Care; Harmon Medical Center; Bombardier Flexjet; Wildfire Detailing; Anaheim; Huntington Beach, Ontario; Four Seasons Surgery Center, Encino; Med-Health Pharmaceutical; One Stop Pharmacy Corporation; and Med-Health Medical Supplies; to pay for construction other than for MRI; to pay BMW; to pay American Express; to buy a Bugatti, a McLaren, a Ford GT, a Shelby, a Bentley, a boat, a horse trailer; to pay for Red Rock Country Club; and to pay for Isabelle Castillo Gardening Services; etc. (11/7 MSTT, p. 74-106, 125-126, 130-131); (11/7 ASTT, p. 139-207); (11/8 TT, p. 21-28; 30-39, 43-84, 94-95, 99-100, 145-150); (11/19 TT, p. 18-29, 32-83); (Ex. 38, 47, 73, 75, 80, 106 A-106B, 109, 111A-111B, 124, 154, 157, 179, 185, 188, 203, 207, 217, 219-220, 223, 227-228, 230, 235, 237, 239, 241-243, ...


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