United States District Court, D. Nevada
ORDER ON RESTITUTION AND FINAL ORDER OF
M. Navarro, Chief Judge
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
PROCEDURAL HISTORY AND FACTUAL FINDINGS
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).
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).
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:
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.
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.
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.
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.
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.
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.
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).
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).
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).
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).
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).
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).
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).
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).
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, ...