Chairman accused of 60-billion yen fraud

Police on Wednesday arrested the chairman of an investment company suspected of defrauding about 40,000 people of 60 billion yen through an overseas shrimp-farming business that didn't exist.

The scheme hatched by the suspect, Isamu Kuroiwa, 59, of the now-defunct World Ocean Farm (WOF), was so large that it drew the attention of Tokyo's Metropolitan Police Department (MPD), other prefectural police departments and the U.S. Federal Bureau of Investigation.

Kuroiwa's arrest concerned 119.4 million yen invested by 30 people.

According to investigators of a police task force, Kuroiwa denied the allegations, saying, "I had no intention to deceive investors."

However, police still do not know what happened to the investors' money.

Police also arrested nine WOF officials and plan to arrest eight others, including investors who were apparently aware of the fraud but brought in new investors to win bonuses from the company.

According to investigators, WOF, set up in 2001, held explanatory meetings throughout Japan starting in summer 2005 about a shrimp-farming business in the Philippines.

"In the Philippines, we have shrimp-farming ponds whose total size corresponds to 450 Tokyo Domes," the potential investors were told.

The company also promised dividends every 10 days on 100,000-yen investment lots and pledged to double the principal within a year.

Around autumn 2006, however, WOF had trouble paying the dividends as promised.

In January 2007, the company notified investors that dividend payments were suspended.

"Our shrimp farms (in the Philippines) suffered damages from typhoons four times in 2006," the notification said.

In February 2007, the FBI froze $40 million (about 4.8 billion yen) that had been sent to the United States from bank accounts affiliated with WOF. The FBI suspected the remittance was part of a money-laundering operation.

After Kuroiwa was questioned by the FBI, he fled to the Philippines in May 2007 using a passport under the name of a subordinate, investigators said.

When he returned to Japan in December, he was arrested on suspicion of violating the passport and other laws. He was given a suspended sentence in May.

Contracts between WOF and investors were based on "anonymous partnerships," which are allowed under the Commercial Code so that investors do not have to reveal their names.

WOF executives apparently used this method to get around a stipulation in the investment law that bans the collection of money from many unspecified people.

In July 2007, the MPD searched about 20 locations related to WOF and then twice dispatched officers to the Philippines.

The officers could find no signs that WOF was operating a shrimp-farming business in the country.(IHT/Asahi: July 3,2008)