Japanese Investor Says CNMI Lt. Governor Said He 'Would Look After' His Investment

Yamamoto says MV Luta operators refuse to pay back investment

By Bryan Manabat

SAIPAN, CNMI (Marianas Variety, Dec. 6, 2016) – In his amended complaint filed in federal court, Japanese investor Takahisa Yamamoto said then-Sen. Victor B. Hocog encouraged him to invest in Rota and assured him that as a “prominent member” of the island community, the official would “look after” the investor’s business dealings there.

Yamamoto has sued Hocog, who is now the lt. governor, and Luta Mermaid LLC/MV Luta’s officers and representatives: Abelina T. Mendiola, Deron T. Mendiola, Fidel S. Mendiola III and Fidel Mendiola Jr.

Also included as a defendant in the amended complaint was businessman Robert Toelkes, Hocog’s “consultant” and a proponent of the controversial reverse-osmosis water treatment plant proposal.

Yamamoto, who is represented by attorney George Hasselback, said the defendants have refused to pay back the $3.399 million he invested in MV Luta.

Hocog earlier filed a motion in federal court to dismiss the complaint, saying Yamamoto’s allegations “never mentioned Hocog,” adding that the lt. governor was named only once in the lawsuit.

According to the amended complaint, which now repeatedly mentions Hocog’s name, Yamamoto visited Rota in 2013 frequently as a tourist, and had grown fond of the island, its many sights and its generous, kind-hearted people.

Yamamoto said he became personally acquainted with then-Senator Hocog and Fidel Mendiola Jr., and they discussed potential investment opportunities in Rota, including but not limited to the possibility of starting a commercial shipping company to serve the island.

He said Hocog would encourage Yamamoto to invest personally in business opportunities in Rota during these meetings.

Hocog assured Yamamoto that his position as a CNMI senator and prominent member of the Rota community would benefit Yamamoto, and Hocog also assured him that he would be well looked after in his business dealings in Rota, the lawsuit stated.

In late 2013, Hocog and Mendiola Jr. approached Yamamoto about funding the operation of a commercial shipping vessel to be used to serve Rota.

Hocog and Mendiola Jr. told Yamamoto that the municipal government of Rota would also be funding the operation.

The lawsuit said Hocog and F. Mendiola Jr. promised Yamamoto that if he were to provide $600,000, the municipal government of Rota would provide a matching $600,000, and the two assured Yamamoto that between his investment and the municipal government of Rota’s there would be sufficient funds for the purchase and operation of a commercial shipping vessel to serve the island.

In Jan. 2014, Yamamoto provided $700,000 to Kizura Marine Inc., an entity that was initially formed by Yamamoto’s business associates.

Mendiola Jr. told Yamamoto that to comply with various laws and regulations regarding the operation of commercial shipping vessels, control over the entity funding these activities would have to be turned over to persons who were U.S. citizens, the lawsuit stated.

It added that Mendiola Jr. convinced Yamamoto to put him, Mendiola Jr., in partial control of Kizuna Marine, and divest other business associates involved in that entity of any involvement and control.

According to his lawsuit, Yamamoto’s initial funding was not used for the acquisition of a vessel — instead, Mendiola Jr. and Abelina Mendiola withdrew some if not all of the funds for their own personal benefit.

Mendiola Jr. and Abelina Mendiola told Yamamoto that another entity, Luta Mermaild LLC, had to be formed to purchase the vessel, and they induced Yamamoto to provide additional financial support for the business entity, the lawsuit stated.

It added that Hocog spoke separately with Yamamoto and assured him that he could trust the word of Mendiola Jr. and Abelina Mendiola regarding these matters.

In March 2014, Mendiola Jr. and Abelina Mendiola assured Yamamoto that the municipal government of Rota was poised to fund the business and told him that he would not be the only source of funding and that the business would have government backing, the lawsuit stated.

Hocog again spoke separately with Yamamoto telling him to trust Mendiola Jr. and Abelina Mendiola, and “confirmed” that the municipal government of Rota would contribute to funding the commercial shipping business and assured Yamamoto that his, Hocog’s, political and social status would ensure that the proposed business was successful, the lawsuit added.

In June 2014, at the urging of Hocog, Mendiola Jr. and Abelina Mendiola, Yamamoto said he advanced another $600,000 to Luta Mermaid LLC. Yamamoto said he did so because of the goodwill he felt for the people of Rota and his desire to see the project succeed.

Yamamoto said he then travelled to Rota to meet with Hocog, Mendiola Jr. and Abelina Mendiola and determine the state of his investment.

During this trip, he added, he was introduced by Hocog, Mendiola Jr. and Abelina Mendiola to Robert Toelkes and was told that Toelkes was a “financial expert.”

The lawsuit stated that the defendants never disclosed their relationship with Toelkes nor did they share with Yamamoto information that Toelkes had been involved in multiple failed business ventures.

Yamamoto said he demanded that someone produce some sort of financial status report to explain to him where his money, over $1 million, had gone.

He said in Sept. 2014, Mendiola Jr. and Abelina Mendiola provided him with a document called “Luta Mermaid Expense Report” that was prepared by Toelkes.

The document acknowledged Yamamoto’s funding of over $1.2 million and also purported to provide an accounting of how that money was spent.

According to the lawsuit,   Mendiola Jr. and Abelina Mendiola “begged” Yamamoto to loan Luta Mermaid LLC an additional $682,000 that would be repaid in six months based upon the conclusions reached with the expense-report document, again with Hocog vouching for the Mendiolas’ trustworthiness.

In Jan. 2015, the lawsuit stated, Toelkes promised Yamamoto that he would have a ship mortgage for the MV Luta and that interest payments on Yamamoto’s investments would begin in July 2015.

Toelkes also promised that Yamamoto would be paid 50 percent of any profit realized from the business as a salary, and that Toelkes would get a loan from Bank of Guam to raise money for the business, the lawsuit added.

In Jan. 2015, Yamamoto said he advanced another $1.3 million after being assured by Mendiola Jr. and Abelina Mendiola that his funding of the purchase and operation of a shipping vessel, by this time christened MV Luta, would result in significant financial benefits as well as provide the people of Rota with much-needed shipping services.

In July 2015, the lawsuit stated that Hocog told Yamamoto that as soon as the vessel arrived on Rota and began operations, Yamamoto’s funds would be repaid as a secured creditor as there were many commercial customers “lined up and waiting.”

In particular, the lawsuit added, Hocog told Yamamoto that there were “significant numbers of investors ready and willing to invest in Rota, but all contingent upon the establishment of reliable shipping services” so Hocog asked for Yamamoto’s patience and support.

In Jan. 2016, Yamamoto said Mendiola Jr. and Abelina Mendiola pleaded with him for his continued support of the project and appealed to his sense of affection for the people of Rota.

“Again F. Mendiola Jr. and A. Mendiola assured [the] plaintiff that with some more money and some more time, all would come together for the project and his financial support would be well rewarded.”

Yamamoto was told that “he was the only one who could facilitate the final expenses for the MV Luta and [he] was besieged for additional support.”

According to the lawsuit, “Hocog again communicated with [the] plaintiff…to reassure [Yamamoto] and to vouch” for the Mendiolas.

Based on these assurances, Yamamoto said he transferred $109,000 to Luta Mermaid LLC.

In May 2016, Yamamoto was again asked for money by F. Mendiola Jr. and A. Mendiola, but this time he declined.

According to Yamamoto, to date he has never been paid any of the money he has been promised nor has he been given an accurate accounting of the funds that he provided for the business.

To date, moreover, MV Luta has not been operated in a commercially reasonable manner in order to maximize the potential for commercial gain in order to reimburse Yamamoto for his contributions to the purchase and operation of MV Luta.

In October, Yamamoto sued the MV Luta owners and Lt. Gov. Victor Hocog for fraud, breach of contract and unjust enrichment.

Yamamoto demands a jury trial and wants the court to have MV Luta sold so that he can be paid with interest and costs, and for other punitive damages.

Yamamoto has also asked the court to order the defendants to provide a complete and accurate accounting of the disposition of any and all funds he contributed to them for the purchase and operation of a commercial shipping vessel in Rota.

Norton Lilly. Long Consulting LLC and MV Luta crewmembers have also sued the ship’s owners in federal court.

In CNMI Superior Court, taxpayer John Del Rosario sued Hocog and Finance Secretary Larrisa C. Larson, in their official capacities, for the release of $400,000 in government funds to Luta Mermaid LLC/MV Luta.

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