3 Scrap Metal Executives Arrested in $45-Million Bank Fraud : Crime: FBI confiscates financial records, says Hiuka America Corp. officials made fraudulent statements to obtain loans. Company calls arrests ‘unexpected.’
The FBI has arrested three top executives of an international scrap metal business in Long Beach on charges that they defrauded almost a dozen banks of an estimated $45 million by doctoring financial records to obtain loans.
The arrests of the Hiuka America Corp. officials followed a Monday morning search of the company’s two-story waterfront offices, where agents executed federal search warrants to confiscate five years of financial statements as well as bank records, contracts and correspondence between the business and its Tokyo-based parent company, Hiuka Sangyo.
“We think it is a very significant case,” Rick Wade, assistant special agent in charge of the FBI’s local white collar crime division, said Tuesday.
Neither Wade nor Assistant U.S. Atty. Brent Whittlesey would comment on the status of the case other than to say their investigation is continuing.
But an affidavit filed in the case describes a disconcerting web of intrigue, including forged signatures, faked contracts to hide huge financial losses and a top-ranking executive in Japan who allegedly ordered his American-based employees to break the law and lie to lending banks.
A top official at Hiuka America said late Tuesday afternoon that the arrests of the three executives had caught them completely off guard.
“Certainly from our standpoint this was unexpected,” said Les Krohnfeldt, an executive vice president of the company. “Under the circumstances it would be inappropriate if I commented at this time.”
In announcing the arrests, FBI officials said their investigation began early this month when top executives of several institutions including Union, Sumitomo and Sakura banks alleged that they had been defrauded by Hiuka in awarding numerous loans over the last two years.
Under the purported scheme, the company sought and received loans under the guise of needing the funds to purchase huge shipments of steel for customers in Japan, Korea and Taiwan. Instead, authorities allege, the company used the money to keep it afloat at a time when it was operating at a $23-million loss in 1994.
Arrested by FBI agents Monday were Hiuka America’s President Katsuyuki Wakita, Executive Vice President Hideki Yoshimura and Chief Financial Officer Shigekazu Okawa. Yoshimura and Okawa were released on $25,000 bonds, though Wakita remains in federal custody on a $500,000 bond.
In an affidavit filed with U.S. Magistrate Judge Brian G. Robbins, FBI Special Agent Arnulfo Medrano said the Mitsui Trust and Banking Co. alleged that Hiuka America fraudulently obtained a $3.5-million loan in March under the guise of needing the money to purchase steel. To prove it could repay the loan, the affidavit says, Hiuka America provided the bank a copy of a purported contract with Raw Materials Development Co., Ltd., to purchase 25,000 long tons of shredded steel from Hiuka.
But in July, one month before the loan was to be repaid, the company asked for additional time, saying its steel shipment had been delayed by a broken crane on the docks, the affidavit says.
In October, however, Mitsui was notified by its headquarters in Tokyo that there might be something awry about the loan with Hiuka America and launched an investigation, the affidavit says.
The inquiry revealed that Hiuka America had never had a sales contract with Raw Materials to purchase the steel, according to the affidavit. In fact, a top official of Hiuka Japan admitted that he had directed Hiuka America’s Okawa to fabricate the contract, according to the affidavit.
The investigation by other lenders and the FBI, Medrano alleged, turned up other fraudulent acts by Hiuka America officials.
At Union Bank, he reported, officials alleged $11 million in loans to Hiuka America were based on fraudulent representations of pending sales of scrap steel.
