Ex-L.A. Banker Accused in $45-Million Embezzlement : D.A. Seeks His Return From Japan

A former Los Angeles executive of Mitsubishi Bank of California was charged today with embezzling nearly $45 million from the bank through a “pyramid-type scheme” in which he created more than $946 million worth of bogus loans and loan renewals, Dist. Atty. Ira Reiner announced.

Reiner said Hirotusugo Mizuno, 44, a former senior vice president with Mitsubishi, now believed to be in Japan, diverted this money through 135 phony transactions in order to pay off large race track gambling debts and play the stock market.

Since Mizuno returned to the bank most of the money he embezzled during a four-year period, Mitsubishi’s actual losses amounted to $5 million, the district attorney said.

Reiner had harsh words for Mitsubishi, saying the bank initially cooperated with investigators but eventually sought to have the case dropped to protect its image. Bank officials refused to turn over certain documents and transferred Mizuno and key witnesses to Japan, he said.

‘No Cooperation at All’

“Their cooperation became less and less until eventually there was no cooperation at all,” Reiner told reporters.

Reiner said it could take up to 18 months to extradite Mizuno from Japan. He is charged on seven felony counts, including misapplication of assets of Mitsubishi and its parent company, Mitsubishi Bank Ltd., two counts of grand theft and four counts of forgery.

If brought to trial and convicted, he will face a maximum sentence of six years and four months and a $10,000 fine.

The district attorney said Mizuno began arranging a series of phony loans in 1981. “He would create a loan, then he would take the proceeds from that loan, then he would create another loan, or loan renewal, to pay off the prior fictitious loan. He kept this going; he kept the balls in the air continually.”

This scheme was uncovered after Mizuno was suddenly promoted and transferred to the New York branch in October, 1984. He had worked in Los Angeles since 1979 after spending 14 years with the bank in Japan.

Fraudulent Line of Credit

In order to cover existing losses, Mizuno before his departure had hastily established a fraudulent $8-million line of credit for a Montana utility company. The man who replaced him called Montana Power Co. in order to introduce himself and discovered that no such loan existed.

Reiner said bank officials confronted Mizuno and extracted a confession from him before ordering him back to Japan and firing him. But they have refused to provide the district attorney’s office with this document.

When it became clear that charges were going to be filed, Mitsubishi officials told prosecutors that the bank’s losses amounted to only $120,000, even though they filed a sworn proof loss statement with their insurance company claiming a loss of $4.9 million, Reiner said.

Reiner said the case was referred to the district attorney’s office in January, 1985, after the state Banking Department was notified of the alleged embezzlement by Mitsubishi, as required by law.

Subpoenas Issued

Reiner said that the case remains under investigation and that the Los Angeles County Grand Jury has issued subpoenas in order to obtain documents. But he said there are no indications that Mizuno had any collaborators.

Despite his criticism of the bank, Reiner said, “there is no allegation of obstruction of justice here.” The bank claimed that Mizuno was returned to Japan for further questioning, not so he could avoid prosecution, the district attorney noted.

Bank officials have told prosecutors that they do not know Mizuno’s whereabouts, Reiner said.

Officials at Mitsubishi Bank of California were not immediately available for comment. The parent company is the world’s fourth-largest bank.