In a case that could expand the reach of federal money-laundering laws, a bankrupt Japanese company will agree in U.S. District Court in Las Vegas today to forfeit about $100 million in U.S. assets, part of a plea bargain on criminal charges that it purchased the properties with money fraudulently obtained abroad.
One federal investigator characterized the guilty plea by Ken International Co. of Tokyo as an "important step" in an ongoing criminal investigation of the company's former owner, flamboyant golf tycoon Ken Mizuno.
Mizuno--the target of a sealed U.S. grand jury indictment returned in June, 1992--is charged with violating U.S. money-laundering laws in connection with an $800-million scheme to oversell golf memberships in the Ibaragi Country Club north of Tokyo.
Now on trial in Tokyo on separate fraud and tax-evasion charges, Mizuno used Ken International to transfer $265 million in "fraudulently obtained proceeds" from Japan to the United States between 1989 and 1991, according to U.S. Atty. Monte N. Stewart in Las Vegas.
Federal officials say about $100 million of the money laundered by Mizuno has been traced to his purchase of the Indian Wells Country Club and Hotel near Palm Springs; the Royal Kenfield Country Club in Henderson, Nev.; a private DC-9 jet; a $2.8-million house and a $2.3-million condominium in Beverly Hills, and three houses and a vacant lot in Hawaii.
Those properties, which U.S. investigators seized last year, will be forfeited under the plea bargain.
What happened to the remaining $165 million is still under investigation, although it appears Mizuno's gambling losses may account for a significant portion of the missing funds. The Las Vegas Review Journal newspaper has reported that Mizuno, a noted high roller, lost as much as $60 million at baccarat tables on the Las Vegas Strip from 1989 to 1991.
Both Mizuno and his company have been declared insolvent by courts in Japan and California, giving bankruptcy estate administrator Kengo Ohashi sole authority over the U.S. properties of Mizuno and Ken International, according to lawyers in the case.
Ohashi--represented by a team of attorneys from the Los Angeles firm Gibson, Dunn & Crutcher--negotiated the guilty plea in a deal that will allow most of the proceeds from the sale of the forfeited assets to be returned to Japanese victims of the golf sales scam.
The assets are valued at $63 million in the current market. An estimated $43 million will be returned to fraud victims; U.S. creditors will receive $9 million to $11 million. The U.S. government will keep a 10% cut of the sales, plus court costs, amounting to about $7 million.
Stewart hailed the case as a "significant advancement" in the use of federal money-laundering laws, describing it as the "second-largest non-drug forfeiture case" in U.S. history and the "first large-scale seizure in the United States of proceeds from foreign fraud or theft."
Federal investigators for years have warned that illicit funds from Japan--particularly from the Japanese \o7 yakuza\f7 underworld--were being laundered in the United States, hidden by a recent wave of legitimate Japanese investment. Although Mizuno is reputed to have strong associations with Japanese organized crime figures, there have been no allegations that \o7 yakuza\f7 funds were directly involved in his investments.
But the case may pave the road for expanding the federal government's controversial powers to seize assets belonging to criminal suspects, which in the past have been used primarily in drug trafficking investigations. "United States Customs Service and Internal Revenue Service developed the case as part of an ongoing initiative to deal with foreign criminals involved in large-scale fraud who perceive the United States as a safe haven for their criminal proceeds," Stewart said.
The Gibson, Dunn attorneys representing Ken International's bankruptcy estate issued their own statement, admonishing others not to repeat Mizuno's alleged sins.
"The U.S. legal system sent a stern message to foreigners everywhere: If you defraud anyone, anywhere, beware of bringing that money into the United States, because the American government can and will prosecute you to the fullest extent of the law," the statement said, "including seizing your assets and returning them to your victims."