A Nevada District Court granted the Securities and Exchange Commission’s request for a $585 million judgment against MRI International, Inc. and its former CEO, Edwin Fujinaga, consisting of disgorgement, prejudgment interest and civil monetary penalties. The case involved a Ponzi scheme in which the defendants collected hundreds of millions of dollars for purported investments in medical accounts receivable, but used the investments to finance personal expenses and repay earlier investments. The court found the defendants liable for the scheme in 2014.
The SEC subsequently sought to enter judgment against the defendants, but the defendants contested the SEC’s calculations. The defendants first objected to the SEC’s $442 million disgorgement request, arguing that it should not have included funds pre-dating 2008 because the complaint only alleged wrongdoing “from approximately 2008.” The court disagreed, finding that the complaint alleged pre-2008 wrongdoing, including the collection of investments in 1998 and false representations in MRI’s 2006 offering book. The court also found that the prejudgment interest was properly computed from 2008, rejecting the defendants’ argument that interest should be calculated from the date of the SEC’s 2013 complaint. Lastly, the defendants argued that $20 million in civil penalties was unwarranted because the company no longer existed. The court disagreed and held that the penalty reflects the degree of scienter and ongoing nature of the conduct, in addition to the unlikeliness of future violations.
SEC v. Fujinaga, No. 2:13-cv-01658 (D. Nev. Jan. 27, 2015)