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Banking and Finance

Criminal Charges Filed in Alleged $1.5 Billion Medical Factoring Ponzi Scheme

 Authorities have filed criminal charges against the president and two former executives of a Las Vegas investment company, alleging the company operated a massive $1.5 billion Ponzi scheme. Nearly two years after the Securities and Exchange Commission filed civil fraud charges, the U.S. Department of Justice announced the indictment of Edwin Fujinaga, the former president and CEO of MRI International Inc. ("MRI"), and former MRI executives Junzo Suzuki, 66, and Paul Suzuki. All three of the men were charged with eight counts and mail fraud and nine counts of wire fraud, while Fujinaga was also charged with three counts of money laundering. The scheme ranks among the top Ponzi schemes ever uncovered. Each of the men could face dozens of years in prison if convicted of the charges.

Fujinaga formed MRI in 1998, claiming the company engaged in the business of purchasing accounts from U.S. medical providers with outstanding balances to be collected from insurance companies. Potential investors were told that Fujinaga and MRI were able to purchase these accounts at a discount, which would then yield a profit if a larger amount was collected from the insurance company. MRI primarily targeted investors living in Japan, and often hosted these investors in the United States for presentations and tours of MRI's office in Las Vegas. Investors were provided promotional materials extolling the investments, including representations about the safety of the investor's principal and the use of investor funds, and were promised annual returns of up to 10.32% annually. An investment was memorialized by a "certificate of investment," which was obtained after an investor either wired money or sent a check to one of MRI's accounts at Wells Fargo Bank in Las Vegas. Potential investors were assured that an independent third party would hold and manage their funds to ensure they were used properly. In total, authorities allege that MRI raised over $1.5 billion from thousands of investors worldwide.

However, in reality, MRI used investor funds for a variety of unauthorized purposes, including the payment of principal and interest to earlier investors - a hallmark of a Ponzi scheme. Indeed, between January 2009 and March 2013 alone, over $600 million was used to pay claims for principal or interest by existing investors. Fujinaga also used investor funds to pay business expenses, to siphon funds to other businesses he controlled, and to support Fujinaga's luxury lifestyle through the payment of his credit card bills, alimony and child support (totaling $25,000 per month), the purchase of luxury cars, and the purchase of homes in Las Vegas, Beverly Hills, and Hawaii. By 2011, MRI began defaulting on payments, and authorities estimate that at least 8,000 people invested in MRI.

After Fujinaga and MRI received an inquiry from the Commission in March 2013, he allegedly hired a shredding company to destroy key documents. He later fired an executive assistant who questioned his actions. Fujinaga also failed to appear for a scheduled deposition, citing fatigue and illness, and MRI never produced documents requested in an investigative subpoena. The Commission filed an enforcement action in September 2013, and a Nevada federal judge entered a final judgment of over $580 million against Fujinaga and MRI in January 2015. Fujinaga and MRI are currently appealing that judgment.

In addition to the charges, the U.S. is also seeking a forfeiture judgment of over $1.5 billion against each defendant.

The indictment

For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.

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