SEC Accuses 2 Firms, Individuals of Fraud

Two Los Angeles firms and individuals raised at least $170 million from 1,000 investors through the fraudulent sale of promissory notes promising a 20% return every three months, regulators charged.

J.T. Wallenbrock & Associates, Larry Toshio Osaki, Van. Y. Ichinotsubo and Citadel Capital Management Group Inc., had their assets frozen Monday by a federal judge, who ordered them to make a full accounting of what they did with investors’ dollars, the Securities and Exchange Commission said.

The defendants neither admitted nor denied the charges leveled by the SEC, which also won a temporary restraining order and is seeking preliminary and permanent injunctions, the agency said.

“The company reached an agreement yesterday with the SEC in its efforts to address the concerns raised by the agency,” said Wallenbrock attorney Stephen Mansfield, with Akin Gump Strauss Hauer & Feld in Los Angeles.

A promissory note is a written pledge to pay or repay a specified sum of money at a stated time with interest added. When done legitimately, it’s essentially a loan, said Robert Burson, senior associate director of the SEC’s Midwest regional office.

In this case, the defendants told investors that the proceeds of the notes would be used by Wallenbrock to purchase receivables of Malaysian latex glove manufacturers for 70% to 80% of the balance due on the receivables, the SEC said. When the accounts receivable are collected, investors receive a 20% return on their investment, the firms claim, according to the SEC.

The federal court in Los Angeles will hear the SEC’s motion April 1.