Judge Freezes Assets of Alleged Ponzi Scheme

Before hearing the sales pitch, the 500 potential investors invited to the Ritz-Carlton Hotel in Marina del Rey last month feasted on lobster and prime rib and enjoyed drinks from an open bar.

They had been told that sports greats Mike Tyson and Earvin “Magic” Johnson would be attending the free dinner and presentation. Tyson was indeed there, a glass of Courvoisier in hand, federal authorities said Thursday, as an investment advisor they described as a scam artist gave his pitch.

Christiano K. Hashimoto, the authorities said, described an opportunity that would earn people in the audience 20% returns the first month -- and 10% a month after that.

The authorities said Hashimoto targeted members of prominent African American churches in Los Angeles. They would make the money by issuing short-term loans to government contractors, Hashimoto told the would-be investors, according to a lawsuit filed by the Securities and Exchange Commission. In reality, Hashimoto was running an old-fashioned Ponzi scheme, the lawsuit alleges -- paying some people “profits” with money brought in by new investors.

On Wednesday, U.S. District Judge Robert J. Timlin in Riverside froze the assets of Hashimoto and his companies and appointed Robb Evans & Asso- ciates, a financial-trustee firm in Sun Valley, as a temporary receiver for the corporate assets.

There was no evidence that former heavyweight boxing champ Tyson was aware of any fraud, said Lisa Gok, the SEC’s assistant regional director for enforcement in Los Angeles

Tyson “probably just got an appearance fee,” she said, noting that former Laker basketball star Johnson wasn’t there.

Neither Hashimoto nor the attorney for his companies, David Michael, could be reached for comment.

Employees of the court-appointed receiver sent workers packing Thursday from the offices of Hashimoto’s company, Financial Solutions, located in an office park near Ontario International Airport. Someone apparently tipped off their counterparts at a second office on Wilshire Boulevard in the Miracle Mile district, where the lights and computers were on but not a soul was seen, Gok said.

“The Cokes were still cold on the desks and the coats were on the rack,” she said.

Hashimoto, 44, of Riverside, president of Financial Solutions and a related company, Ohana International Inc., raised at least $8 million, Gok said. Sales-pitch documents said his goal was to raise $150 million, she added.

The promoters told those at the Marina del Rey event that Johnson’s financial advisor, Warren Grant, was an investor in the deal, Gok said. Neither Grant nor Johnson, now a prominent entrepreneur, could be reached for comment.

Steve Sugerman, a spokesman for Johnson’s development company, said no one at that office Thursday could recall any dealings with Hashimoto or Financial Solutions.

Gok also said there was no sign of involvement by leaders of the local churches where many of the investors were recruited. She said those churches included the First African Methodist Episcopal Church, the Faithful Central Bible Church and the West Angeles Church of God in Christ.

Most of Hashimoto’s sales agents were African Americans, she said, and they apparently promoted the investment scheme by talking up members of the congregations.

“It was kind of a word-of-mouth thing,” Gok said. “Many, many members of the congregations heard about it.”

By exploiting bonds of trust, the promoters tried to take advantage of investors in what is known as an affinity fraud, the SEC said in its complaint filed Wednesday in U.S. District Court in Riverside. It worked as a Ponzi scheme, the SEC said, paying the 10% monthly returns to some investors using funds from new victims.

The SEC suit said Hashimoto had begun to expand nationally, alleging that Financial Solutions agents made a sales pitch in Chicago last week to prospective investors. They were told the company was financing an unnamed government contractor who was building “invisible walls” for the FBI, SEC attorney Peter F. Del Greco said in an affidavit.

The alleged scam came to the notice of authorities via a tip from Barry Minkow, who as a teenager founded ZZZZ Best, a Reseda carpet-cleaning company that perpetrated a notorious fraud on Wall Street investors. Having served a lengthy prison sentence, Minkow is now the pastor of a San Diego church and helps operate a private company that investigates suspected frauds.

Minkow said he and Juan Lopez, a private investigator who works for Minkow’s Fraud Discovery Institute, posed as investors to meet with Financial Solutions. His 15-page report, addressed to Del Greco and dated June 17, was attached to the SEC’s filings with Timlin.

Gok said it took more than three months after that to shut down the operation because the Ponzi scheme was still in its early phases, paying “interest” to those investors who asked for it. Many of them heeded Financial Solutions’ advice to “roll over” their investment, or put their profits back into their accounts, generating big profits on paper, she said.

Brick Kane, chief operating officer for Robb Evans, said the records at the Ontario office were disorganized and that it was impossible to tell how many people had invested.

The SEC said Hashimoto’s main claim was that he was providing short-term financing for Gentech Fabrication Inc., a Chino metal-products manufacturer that he said had been awarded $13 million in U.S. government contracts for scaffolding used in the construction of military aircraft.

In reality, the SEC said, the Air Force had canceled Gentech’s largest contract and it had less than $1.4 million in government work lined up.

Gentech officials didn’t return calls seeking comment.