NEW YORK – The FBI probed MRI International Inc. in 2009 on suspicion that it was running a Ponzi scheme, according to a source who cooperated with the investigation.
The revelation comes after the U.S. Securities and Exchange Commission won permission to freeze the assets of MRI and its president and CEO, Edwin Fujinaga, from a U.S. district court in September.
The SEC suit alleges that MRI was a massive Ponzi scheme that targeted Japanese investors and defrauded them of more than ¥78 billion.
The FBI’s probe focused on the source of the assets, a former employee of a business run by Fujinaga said on condition of anonymity earlier this month.
During the course of the investigation in 2009, the source told the FBI that MRI officers had conferred about using investors’ money to pay dividends to other investors as early as 2008. At the start of 2009, the FBI was also given documentation regarding the co-mingling of investor funds with MRI’s operating funds, the source said.
The bureau further knew Japanese investors were taking tours to the Las Vegas-based asset manager’s offices, that Fujinaga approved suspiciously high business expenditures and that he led an opulent lifestyle, the source said.
When asked about the investigation, Erick Ferran, a lawyer representing MRI and Fujinaga in the SEC case, said “there were some correspondences exchanged” between MRI and the FBI but that Ferran “did not participate directly.”
“It was not an actual FBI investigation to the best of my recollection,” he said.
These indications that U.S. authorities knew four years ago about the abuses being raised by the SEC raises the question of why no action was taken sooner. Japan’s Securities and Exchange Surveillance Committee apparently did not start investigating MRI until April this year.
The FBI declined to comment on the results of the investigation. While no federal charges were filed, it is not clear whether the U.S. attorney was presented with a case based on it.
It is also unclear whether the FBI shared information from the 2009 probe with the SEC or whether the information ever made it to Japanese authorities.
The FBI has no legal mandate to share information related to securities violations with the SEC. When it does, the SEC chooses which cases to investigate based on a triage system, said sources familiar with the workings of the two agencies.
Information received by the SEC about potential acts of fraud targeting overseas victims would normally be passed on to the financial regulator in the victims’ country, a separate source said.