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Monday, January 03, 2011
Robert Iwamoto trust sued over Maui Ponzi scheme
By Andrew Walden @ 8:31 PM :: 19052 Views :: Hawaii County , Maui County, Ethics, Law Enforcement

by Andrew Walden

Lloyd Kimura, a Democrat donor, gambler, and brother of Hawaii County Prosecutor Jay Kimura, pled guilty December 28 in State Court to operating a multi-million dollar Ponzi scheme known as Maui Industrial Loan & Finance Co. or Maui Finance Co. (MFC).  He could face up to 20 years in prison.   (UPDATE: Jay Kimura, on Jan. 7, announced his resignation effective April 1.  He plans to move to Maui.) 

But Kimura’s admission of guilt is just the beginning.  In Hawaii Federal Bankruptcy Court, MFC Bankruptcy Trustee Dan S. Field is suing a former co-owner of Kimura’s Ponzi scheme, RNI-NV.  RNI is a limited partnership controlled by Robert N Iwamoto Jr, the owner of Roberts Hawaii bus line.  Iwamoto is a major DoE transportation contractor.  Iwamoto’s son, Hawaii Board of Education member and attorney Mr. Kim Coco Iwamoto, is one of the nation’s highest ranking transsexual elected officials.  RNI-NV had been a minority owner of the Ponzi scheme from 1999 until October 8, 2007.  According to court documents, RNI-NV’s original “investment” was reportedly $1 million.  

In pretrial depositions prior to entering his plea, Kimura admitted to prosecutors that MFC had been a Ponzi scheme “from the beginning”.  Kimura is due to present an additional plea bargain in Federal Court on January 5.  

Kimura was a partner in MFC’s and its predecessor since 1974.  In 1985 he became sole owner.  At about the same time, State law was changed to prohibit the acceptance of customer deposits by non-bank companies such as MFC.  Instead of becoming a bank or closing up business, MFC continued illegally for 24 more years.  In 2009, the state Division of Financial Institutions ordered Maui Finance to stop taking deposits.

It is not clear how MFC’s illegal business practices escaped notice for so long.    Perhaps one clue comes from the list of defendants in Field v Estate of Rose Kepoikai etal.  (See list below.)  Bankruptcy Trustee Dan Field alleges that these individuals received more in “interest” from the Ponzi scheme than they originally paid in in principal.  Well known family names include Akana, Spencer, Holt, Judd, Lindsey, Kaaua, Purdy, and Mossman.  Bankruptcy Trustee Dan Field alleges their so-called profits were paid out of more recent deposits and are therefore subject to confiscation in an effort to make victims whole.    

In her October 29, 2010 response to the lawsuit, Kelly Perkins of the Estate of Rose Kepoikai refers to a decade-earlier dispute between the Estate and MFC.  At the time Lloyd Kimura was Trustee of the Kepoikai Estate.  He would not be discharged until July 11, 2001.  She points out:

Due to the nature of small island politics taking on Kimura and MFC to settle our estate was a liability for (our attorneys) Roland and Mancini not a blessing.

In her defense, Perkins writes:

The Estate did take all legal steps to satisfy its debtors, including timely public notice(s), several hearings, Judge directed court proceedings (Hon Judge Baxa), and extensive CPA audits.

Former Second Circuit Court Judge Artemio Baxa is now a member of the University of Hawaii Board of Regents. 

Perkins’ response to the lawsuit gives a revealing glimpse into the nature of the “satisfactory” evidence presented in the 1999 proceedings (case# 2CC00-0-000130).  A December 20, 1990 Promissory Note obligated MFC to repay the Estate’s original deposit of $500,000 plus 10% annual interest.  Ten years later trustees were attempting to wind down the Estate and distribute its assets to the heirs.  A February 4, 2000 letter from an Estate attorney states that “the total amount owing to the Estate by Maui Finance and/or Mr Kimura in his capacity as the former trustee, is $1,533,329.51 as of December 31, 1999.”  And what assets did MFC have available to pay off the Estate?  An October 16, 1999 letter to the Estate from Kimura’s attorney details them:

30-day Jumbo Certificate at American Savings Bank in the name of the Estate of Rose Kepoikai in the amount of $446,349.33. 

A list of “hard assets” in which Lloyd Kimura has a significant interest.  Parcel A was sold within the passed (sic) couple of months but is included because the proceeds were used to purchase parcels B and C which are located within the “Kihei Franks” project in Kihei.  Parcel D is the building at 1816 Mill Street (where Simply Sweets is located).  Parcel E is a one acre residential property in Waihee.  And parcel F is Lloyd and his wife’s home….  The equity in these properties totals approximately $400,000.

Financial Statements of Maui Industrial Loan & Finance Co. Inc….  As we discussed Lloyd is a 60% owner of Maui Finance.  The company has equity of $2,753,850.88.  We understand your concerns about taking security in the company under the circumstances but we submit that as partial security for the repayment of the approximately $1.236 million note owed by Maui Finance, your client and the other heirs would be protected.

Somehow the fact that Kimura’s own home and other heavily mortgaged real estate holdings were being offered in 1999 as “hard assets” with which to settle a MFC debt did not cause the court or other regulators to shut down his scam.  But there’s more.  Kimura’s lawyer continues:

Finally, my client has advised me that he has made arrangements for Maui Finance to borrow funds from third parties over the next couple of weeks to make further deposits into the “escrow” account for eventual distribution to the heirs.  Maui Finance expects to receive approximately $400,000 of such funds within one or two weeks;  the funds would immediately be transferred to an approved and secured account.

In other words, new depositors’ funds would be used to pay off old depositors.  This is the definition of a Ponzi scheme, but Kimura’s lawyer didn’t bat an eyelash.  Instead he suggested:

This letter is also intended to follow-up on our discussion concerning the possible retention of someone such as Judge McConnell or Judge Mossman to act as a receiver or master to be the holder of the security being used in this situation.  My client is amenable to such an arrangement.

Judge Boyd Mossman in 2002 became an OHA TrusteeJudge E. John McConnell is listed the final trial judge in the State records of the Rose Kepoikai Estate.  The Estate was in probate 45 years from January 17, 1958 to December 4, 2003.

Unlike these defendants, Iwamoto’s RNI-NV was a co-owner of Maui Financial.  According to Fielding’s April 21, 2010 Bankruptcy Court filings:

RNI owned 171,571 shares of the authorized and issued common stock of MFC. 

According to its filings with the DCCA, MFC issued only 300,000 shares of common stock and another 200,000 shares of preferred stock. 

In May of 2007 RNI demanded that MFC buy back its 171,571 shares of MFC common stock.

On or about October 8, 2007, RNI and MFC entered into a Stock Redemption Agreement whereby MFC agreed to repurchase from RNI the aforesaid 171,517 shares of MFC stock for a purchase price of $2,500,000.

On or about October 8, 2007, in furtherance of the Stock Redemption Agreement, MFC executed a Promissory note in favor of RNI in the principal amount of $2,500,000.

In its response, dated May 14, 2010, lawyers for RNI admit to owning the MFC Shares, but deny “demanding” the stock buyback.  RNI’s lawyers admit their client entered into the Stock Redemption Agreement.  But they deny Trustee Field’s assertion that the MFC Ponzi scheme was “insolvent on October 8, 2007”.  Ponzi schemes are insolvent by their very nature.  In bankruptcy proceedings, creditors are generally paid before stockholders, thus the equity for debt swap put RNI-NV in a much better position to collect money from the bankruptcy proceedings. 

Attorneys for Bankruptcy Trustee Field alleges that MFC then made seven “distributions” to RNI totaling $1,040,000 between November 1, 2007 and October 9, 2008.  The Trustee is demanding return of these funds so they can be distributed to the victims.

According to the Maui News December 29, Kimura pled guilty to crimes committed while those “distributions” were being given to RNI-NV:  “obtaining more than $100,000 by means of a fraudulent security, $590,655.32 from Barron and Rosaline Souza in 2007 and $235,000 from Ron and Carol Riccio in 2007 and 2008.”

In addition to those recent victims, Maui business owners Ronald and Miriam Jacintho in a civil suit filed last February allege that Kimura “looted” $1 million from their accounts in 2008 and 2009.

MFC and Kimura’s Wailuku Tire Co. began missing payments in mid 2009—a few months after the last payment to RNI-NV.  Commercial creditors, including BF Goodrich, have sued.

But, due to MFC’s incomplete payment on its $2.5M promissory note, in November, 2009, RNI-NV won a State court judgment for a $1,892,000 breach of contract (case# 2CC09-1-000037), putting it near the top of the list of creditors to be repaid.  But if the Trustee’s suit is successful, that could be reversed and RNI-NV could be ordered to return the $1,040,000 as well.

---30---

10-90126 Field v. The Trust Estate Of Rose Kepoikai et al
Case type: ap Related bankruptcy: 10-00235 Bankruptcy Judge: Robert J. Faris
Date filed: 10/17/2010 Date of last filing: 12/28/2010

 

Filers
 
Name Type Added Terminated
Koridon Luis Mahuka Andrew         Defendant      10/17/2010       
Lucille Wailani Kawa Antonio         Defendant      10/17/2010       
George Awana Jr         Cross-Claimant      10/17/2010       
George Awana Jr         Defendant      10/17/2010       
Gregory H Awana         Defendant      10/17/2010       
Edith Leinaala Kaaua Britto         Defendant      12/07/2010       
Annette Mapuana McGuire Collins         Defendant      10/17/2010       
Yvonne Piilani Daniels Cox         Defendant      10/17/2010       
Harry Valentine Daniels Jr.         Defendant      10/17/2010       
Susan Linda Daniels         Defendant      10/17/2010       
Deborah Ann Daniels Bairos         Defendant      10/17/2010       
Dane S Field         Plaintiff      10/17/2010       
Leilani Viola Weight Foss         Defendant      10/17/2010       
Enid Laurel Daniels Frey         Defendant      10/17/2010       
Sandra Lei Daniels Hammersley         Defendant      10/18/2010       
Barbara Jean Spencer Hanchett         Defendant      10/18/2010       
Harriette Healani Holt         Defendant      10/18/2010       
Harriette Lucille Holt         Defendant      10/18/2010       
Harry Daniels Kaleihuapala Holt         Defendant      10/18/2010       
Milton Keaulana Holt         Defendant      10/18/2010       
Louisa Lamela Holt Battley         Defendant      10/17/2010       
Barbara Uilani Bailey Wilson Jefimoff         Defendant      10/18/2010       
Abigail Kawai Jenks         Defendant      12/07/2010       
Alan Spencer Johnson         Defendant      10/18/2010       
Edric Travis Johnson         Defendant      10/18/2010       
Maile Gay Ng Judd         Defendant      10/18/2010       
Archibald Ebenizer Kea Alii Q'Niu Kaaua         Defendant      10/18/2010       
Nancy Elwill Onaona Keller         Defendant      10/18/2010       
Jennie Ho Kimura         Defendant      10/17/2010       
Geraldine Davena Ululani Kawai Kish         Defendant      10/18/2010       
Mattie Littrell Kittrell         Defendant      10/18/2010       
Henry Benjamin Kukona Jr.         Defendant      10/18/2010       
Luella Mahealani Gay Holt Kurkjian         Defendant      10/18/2010       
Marilynne Nadine Chapin Ledward         Defendant      10/18/2010       
Richard Charles Lindsey Jr.         Defendant      10/18/2010       
Haroldene Hokulani Spencer Liptak         Defendant      10/18/2010       
Janet Ethelwynn Lloyd         Defendant      10/18/2010       
Eudora Keliikokua Kukona Lopes         Defendant      10/18/2010       
Mancini, Welch & Geiger LLP         Defendant      10/17/2010       
Jacqueline Theresa Daniels McBirney         Defendant      10/18/2010       
David Harold McGuire         Defendant      10/18/2010       
Gay Iwalani McGuire         Defendant      10/18/2010       
Patricia Kaonohilani McGuire         Defendant      10/18/2010       
Carolyn Donna Weight Mossman         Defendant      10/18/2010       
Ione Uilani Daniels Nobriga         Defendant      10/18/2010       
Eveline Kathrine Daniels Nune         Defendant      10/18/2010       
Georgiana Mokihana Kukona Oliveira         Defendant      10/18/2010       
Zenobia Kaleihulumamo Kukona Oue         Defendant      10/18/2010       
Hokulani Haila Holt Padilla         Defendant      10/19/2010       
Kelly McKenzie Perkins         Cross-Claimant      10/19/2010       
Kelly McKenzie Perkins         Defendant      10/19/2010       
Sharon Ann Walker Podobnik         Defendant      10/19/2010       
George Mauae Purdy III         Defendant      10/19/2010       
Jeffrey Kawai Purdy         Defendant      10/19/2010       
Kenneth Alii Purdy         Defendant      10/19/2010       
Paul Miki Purdy Sr.         Defendant      10/19/2010       
Gail A. Ritch         Defendant      10/19/2010       
Neal Wallace Ritch         Defendant      10/19/2010       
Robert E. Rowland Attorney At Law, A Law Corporation         Cross Defendant      10/17/2010       
Robert E. Rowland Attorney At Law, A Law Corporation         Defendant      10/17/2010       
Robert E. Rowland, Successor Trustee Of The Trust Estate Of Rose Kepoikai         Defendant      10/17/2010       
Robert E Rowland         Defendant      10/17/2010       
Georgia Bell Weight Sandberg         Defendant      10/19/2010       
Louella Noelani Spencer Schutte         Defendant      10/19/2010       
Allyson Kaleialoha Marie Spencer         Defendant      10/19/2010       
Dylan Gerald Pakana Spencer         Defendant      10/19/2010       
Lavelle Michael Spencer         Defendant      10/19/2010       
Leroy Puuloa Noah Spencer         Defendant      10/19/2010       
Mervin Arnold Spencer         Defendant      10/19/2010       
Robin Kepoikai Spencer         Defendant      10/19/2010       
Jadelynn Kaleiokalani Irene Spencer Kuhns         Defendant      10/18/2010       
The Trust Estate Of Rose Kepoikai         Defendant      10/17/2010       
Edyne Haunani Daniels Valente         Defendant      10/19/2010       
Jerry Allen Walker         Defendant      10/19/2010       
Barbara Eleanor Weight         Defendant      10/19/2010       
Leslie-'Aina Amelia Weight         Defendant      10/19/2010       
Lowell Delano Weight         Defendant      10/19/2010       
Michael Anthony Weight         Defendant      10/19/2010       
Thomasine Kuuleimomi Bailey Wilson         Defendant      10/19/2010       
Wendy Puanani Bailey Wilson Antoncich         Defendant      10/17/2010       
Noel Ululani Bailey Wilson Woodard         Defendant      10/19/2010       
Lila Ann Kauinohea Kawai Yim         Defendant      10/19/2010    

 

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