SECURITIES AND EXCHANGE COMMISSION 

Litigation Release No. 14684 / October 11, 1995 

 United States v. Stafford Y.L. Mew, Rodney H.S. Kim, Morreon B. Rude, and Jack M.K. Gonzales and Charles E. Andrews, CR 9405246 FDB (W.D. WA.) 

The Securities and Exchange Commission ("Commission") and the United States Attorney for the Western District of Washington,  Katrina Pflaumer, announced that on July 9, 1995, Judge Franklin D. Burgess, United States District Judge for the Western District of Washington at Tacoma, Washington, sentenced defendants Stafford Y.L. Mew, Morreon B. Rude, Jack M.K. Gonzales, Rodney H.S. Kim and Charles E. Andrews to various terms in prison in connection with a prime-bank fraud scheme.  Mew and Rude are residents of Washington.  Gonzales and Kim are attorneys admitted to practice law in the State of Hawaii.  Kim is a resident of Las Vegas, Nevada.  Andrews is a resident of Chicago, Illinios. 

The Superseding Indictment charged the defendants with five counts of wire fraud, in violation of Title 18, U.S.C. Section 1343; five counts of money laundering, in violation of Title 18, U.S.C. Section 1956 (a)(2)(A) and Section 2; one count of money laundering, in violation of Title 18, U.S.C. Section 1956 (a)(1)(1)(i); and one count of conspiracy, in violation of Title 18, U.S.C., Section 371. 

The Commission previously filed a civil complaint against North Pacific Investments, Inc., Mew and Rude alleging violations of the antifraud provisions of the federal securities laws relating to the same investment scheme.  The civil proceeding was stayed pending the criminal trial.  Both the Superseding Indictment and the civil complaint alleged that the defendants raised at least $10 million from a non-profit Hawaiian corporation, Unity House, which provided benefits to current and retired members of an employees union.  The defendants solicited investments from individuals and organizations by promising investors that they could earn substantial profits on their investments through a prime bank note program in which investments allegedly were pooled together to purchase and sell prime bank notes.  Instead of investing the funds as promised, the defendants conducted a "ponzi" scheme in which a portion of the funds from Unity House were used to pay the promised returns and interest of this and other investors, thereby decreasing the principal amount of the investment.  Portions of the invested funds were used for the defendants' personal benefit. 

The defendants were ordered to pay, jointly and severally, $10 million in restitution (of which approximately $4,000,000 has been collected).  Mew was sentenced to 236 months in prison.  Rude was sentenced to 135 months in prison. Kim was sentenced to 189 months in prison.  Andrews was sentenced to 30 months in prison.  All of the defendants received three year terms of probation.  All of the defendants, except Andrews, were restricted from employment as a financial, investment and brokerage company employees or consultants during the three year period of their probations.    

For further information see Litigation Release Nos. 13887, 14011, 14035, 14064, 14121 and 14502.