Dane Field, the trustee in the Maui Industrial Finance Co. bankruptcy, is suing 25 investors in the company to recover money they received as interest over and above their original investment or deposit, claiming the money was not really interest but the fruits of a Ponzi scheme.
Field’s attorney, Bradley Tamm, said Maui Industrial’s owner, Lloyd Kimura, acknowledged during depositions earlier this year that he had used money from late investors to pay off early investors, without really generating income from operations.
This is the definition of a Ponzi scheme, said Tamm. The supposed business – in this case, a loan company also known as Maui Finance – does little or no real business but simply takes money from new investors (or depositors) and uses it to pay interest or dividends to previous investors (or depositors).
At Maui Finance, people turned over cash to Kimura – in one case, $2 million – expecting to receive interest well above what commercial banks were paying on certificates of deposit.
In the creditors’ meetings after the bankruptcy, some people said they thought they were making deposits in a banklike institution. In 2009, the state Division of Financial Institutions ordered Maui Finance to stop taking deposits, and the business collapsed.
Tamm said that in depositions, Kimura admitted that he had been operating a Ponzi scheme almost from the day he became sole owner of the company around 1985.