LAS VEGAS (CN) - A federal judge Thursday allowed some claims to proceed but dismissed others in a class action accusing two corporations and three men of running an $800 million Ponzi scam in medical collections, targeting investors in Japan.
Lead plaintiff Shige Takiguchi claimed that "MRI purported to deal in the purchase and collection of 'medical accounts receivable'" and that "through repeated and specific misrepresentations, MRI, Edwin J. Fujinaga, Junzo Suzuki and Paul Musashi Suzuki each assured MRI's prospective and existing investors that its business was legitimate and that investors' monies would be secure. MRI has never registered its securities with the United States Securities and Exchange Commission."
Lead defendant MRI International is a Nevada corporation owned and operated by Las Vegas resident Fujinaga, 67, also a defendant.
MRI's Tokyo operations were run by defendant Junzo Suzuki, who controlled MRI's marketing and investment solicitations in Japan.
Defendant LVT is a Nevada escrow company, also known as Sterling Escrow, which handled MRI's bookkeeping.
The investors claimed the defendants violated the Securities and Exchange Acts of 1933 and 1934, but "defendants argue that plaintiffs' securities claims must be dismissed because they have failed to adequately allege that the transactions at issue were domestic," U.S. District Judge Howard D. McKibben wrote.
Rulings by the U.S. Supreme Court, the 2nd Circuit and the 9th Circuit define domestic transactions as those taking place in the United States, according to McKibben, who said, "it is undisputed that MRI did not register its securities in the United States."
"Thus the question is whether irrevocable liability was incurred or title was passed in the United States. Defendants argue that plaintiffs have not plead sufficient facts to determine where irrevocable liability was incurred. ...
"Two conditions were required for MRI and the plaintiffs to incur irrevocable liability: receipt of the executed contracts by MRI and receipt of wired funds in the Sterling Escrow account. The wiring of money was completed in the United States. The complaint supports a reasonable inference that the executed contracts were also received in Nevada."
McKibben dismissed without prejudice a fraud claim against the Suzukis and fraud and securities violations claims against Sterling Escrow.
He denied motions to dismiss securities violations claims against MRI and Fujinaga.
The SEC in September 2013 froze MRI's assets and in a separate federal lawsuit and accused Fujinaga of running "an extensive and egregious Ponzi scheme that victimized thousands of investors, depriving many of their entire life savings. From October 1998 through May 2013, MRI received over $800 million from investors."
Fujinaga told investors he could buy medical accounts receivable at a discount from medical providers and recover the full amounts from insurers. But the SEC called it a Ponzi scheme in which he used new money to pay off old investors.
Rather than buying discounted medical accounts receivable, the SEC said, Fujinaga used a second company he owns, CSA Service Center, to buy himself houses in Beverly Hills, Hawaii and Las Vegas, and to pay his alimony, child support, credit card bills and buy "luxury cars."
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