WAILUKU - Former accountant Lloyd Kimura was sentenced to 20 years in prison Thursday on state charges of prohibited securities practice and making false or misleading financial statements.
Second Circuit Judge Joseph Cardoza told him he had a debt to pay to society and advised him to "make positive use of your time" in prison.
Kimura stood quietly during the 20 minutes of the sentencing, except that when Cardoza asked him if he had anything to say, he said, "What I did was wrong, and I accept the penalty."
Article Photos
Former accountant Lloyd Kimura (left) appears for sentencing Thursday with attorney Philip Lowenthal in 2nd Circuit Court. Kimura was sentenced to 20 years in prison on state charges.
The Maui News / MATTHEW THAYER photo
Kimura, 61, had said almost the same thing when he was sentenced three weeks ago in U.S. District Court on federal charges related to the Ponzi scheme he ran through his Maui Industrial Loan & Finance Co.
The judge gave him 11 years, eight months on the federal charges, and he has already served seven months. He went to prison in January after a bargained plea that includes an order of restitution for $8,093,907.
It is unlikely his assets, which are in U.S. Bankruptcy Court, will cover much of that, but his defense attorney, Phil Lowenthal, said it would be at least a year before the trustee in bankruptcy completes his recovery and learns how much remains to distribute among the four dozen or so people Kimura defrauded.
The federal sentence does not allow for parole, but the state term is indeterminate, which means he could seek parole from the longer state term. Cardoza also sentenced him to two five-year terms, all to be served concurrently.
When Kimura filed for bankruptcy, both personally and for his businesses, his debts totaled about $23 million. The actual amounts of cash put in and lost, however, were less.
From at least 1986, clients placed cash with Maui Industrial on the promise that they could earn up to 12 percent interest. Kimura told them - many of whom were friends or people he had done business with - that he would turn around and lend out the money at up to 24 percent interest on short-term loans, for such things as elaborate Filipino anniversary parties.
During much of the past 20 years, bank certificates of deposit were paying far less, as little as 1 percent, so 10 percent or 12 percent from Maui Industrial looked like an excellent return.
Kimura had other businesses, including a CPA firm and Wailuku Tire Co., as well as real estate. The people who placed money with him, or borrowed from Maui Industrial, said they never suspected he was not a legitimate and solid businessman.
In fact, according to the federal indictment, he was using new cash to pay interest to older accounts.
Not all the people who accepted his promissory notes took their interest payments out. Some let them stay and accumulate, which explains how the books showed as much as $20 million in the accounts, while only a much smaller amount was originally placed with him.
The three courts, U.S. District, U.S. Bankruptcy and Hawaii Circuit, agreed to allow the bankruptcy trustee to pursue recovery and to determine how much was lost and how much remains.
Lowenthal said that would save paying for three very expensive forensic audits, thus leaving more for the estate in bankruptcy to distribute.
U.S. District Judge David Ezra ordered Kimura to pay his victims at least 10 percent of any income he makes once he is released, but by then he will be about 73 years old, and as part of his plea agreement, he has surrendered his certified professional accountant's license.
In December, Kimura had pleaded guilty to two counts each of prohibited securities practice, a Class A felony, and two counts of misleading statements. He then pleaded to the federal charges and entered prison.
But sentencing was delayed until the bankruptcy court could make a statement of its findings, and the state sentencing was held up so that he could plead guilty in federal court first.
That way, the state terms could be served concurrently with the federal term. If he had been sentenced first in state court, the federal sentence could have been added to the end of the state term.
* Harry Eagar can be reached at heagar@mauinews.com.
