16 December – LAWFUEL – The Law News Network – A man who ran a gigantic Ponzi scheme and continued to offer bogus investments in accounts receivable “factoring” after being ordered to stop by a federal judge was sentenced this morning to 240 months in federal prison.
Larry Toshio Osaki, 57, of Upland, was sentenced at the end of a 3½-day hearing by United States District Judge Stephen V. Wilson, who said the defendant “single-handedly caused huge loss and havoc.”
In addition to the prison term, Judge Wilson ordered Osaki to pay more than $145 million in restitution to victims.
Osaki pleaded guilty on March 22, 2005 to conspiracy to commit securities fraud, two counts of securities fraud, obstruction of justice and one count of money laundering. Osaki’s scheme cumulatively collected a quarter billion dollars from nearly 7,000 investors and caused $145 million in losses. That scheme started at his Pasadena company, J.T. Wallenbrock & Associates, and was continued with a second firm based in Edmonton, Canada.
From at least 1997 until his arrest in October 2003, Osaki offered investments in accounts receivable financing, which is sometimes called factoring. Employees at Wallenbrock, and later at the Canadian-based Village Capital Trust, told investors that their money would be used to purchase the accounts receivable of latex glove manufacturing companies based in Asia and that investments would yield returns of 20 percent every 90 days. However, neither Wallenbrock nor Village Capital Trust purchased any accounts receivable, nor did they operate a factoring business. Instead, Osaki used investors’ money to improperly pay the salaries for him and his associates and run his own venture capital firm.
“This started and ended as a fraud,” Judge Wilson said this week during the sentencing hearing. Today, Judge Wilson concluded that the “evidence was overwhelming that it was a massive fraud and [Osaki] knew it…this was a wholesale fraud from the beginning…. It was brazen and callous, [and] he knowingly and callously ruined thousands of lives.”
In 2002, the United States Securities and Exchange Commission filed a civil lawsuit alleging that Wallenbrock was part of an illegal securities fraud. The SEC obtained a preliminary injunction that barred Osaki and others from running the companies. A federal judge in Los Angeles also appointed a receiver to oversee Wallenbrock. In 2003, the injunction became permanent. However, contrary to the injunction issued by the federal court, Osaki, with the help of co-conspirators, relocated operations to Canada, Belize and elsewhere. With the help of his co-conspirators, Osaki formed a new company off-shore, Village Capital Trust, that offered the same bogus accounts receivable investments as Wallenbrock, and it continued to operate as a Ponzi scheme.
Osaki has been in custody since October 2003, when he was arrested by federal authorities at his home in Upland.
This case is the result of an ongoing investigation by IRS-Criminal Investigation Division and the Federal Bureau of Investigation. The United States Securities and Exchange Commission provided substantial assistance during the investigation.