ENGAGEMENT: JT Wallenbrock Case Summary

On January 28, 2002, the SEC obtained an order temporarily enjoining J.T. Wallenbrock & Associates, Larry Toshio Osaki, Van Y. Ichinotsubo, and Citadel Capital Management Group, Inc., from engaging in fraud, making unregistered sales of securities, and acting as unregistered brokers in violation of federal securities laws. The SEC alleged that the defendants raised at least $200 million from more than 1,000 investors nationwide purportedly to purchase accounts receivable.

On February 21, 2002, the Court appointed James H. Donell as the receiver of Wallenbrock and Citadel. Among other things, Mr. Donell was given the power to oversee all aspects of the operations of Wallenbrock and Citadel, to take control and determine the value of the companies’ assets and property, and to gather information on investors.

The Court further ordered Wallenbrock and Citadel and their owners, partners, officers, directors, and employees to transfer within ten days from February 21, 2002, all assets, funds, and other property that are presently held in foreign locations in the name of Wallenbrock or Citadel, or for the benefit or under the control of any of them, or over which they exercise actual investment or other authority including signatory authority.

On February 22, 2002, the day following issuance of the Order, the receiver and his staff took possession of the J.T. Wallenbrock and Citadel offices located in Pasadena, California. SEC attorneys, the receiver’s attorney, Mr. Osaki and his attorneys, and approximately twenty (20) other employees of Citadel were present at the time the receiver took possession of the premises. All employees were served with a copy of the Order Appointing Receiver.

All locks to the offices were changed by the receiver’s locksmith, and guards were posted at the premises on a 24/7 basis. All employees were interviewed and were then escorted off the premises by the receiver’s staff. All computers were secured, and the Internet and modems were disabled. In addition, remote access to the voice mail system was terminated. A team of computer consultants was immediately retained by the receiver to begin reviewing the computer systems and files. The offices contained approximately sixty (60) desktop computers as well as a very large central computer lab with a substantial amount of computer software and hardware.