University Finance Director Convicted Of $1.7 Million Embezzlement In California

Kiyoshi Hatanaka, 52, of Aliso Viejo, California and the former Finance Director and Chief Investment Officer of Soka University of America, was convicted on federal charges last week of embezzling more than $1.7 million from the institution. Hatanaka was originally indicted on eight counts of embezzlement and eight counts of money laundering. He was sentenced to 37 months in federal prison and ordered to pay restitution in the amount of $1,756,000. According to prosecutors, Hatanaka's scheme occurred between 1999 through January 2006, wherein he created bogus Soka accounts into which he transferred funds and then re-transferred to his personal accounts at California Bank and Trust. In April 2005, the university relocated and the campus property where Soka was located in Calabassas, California was sold to a consortium of conservation groups and converted into a park. Hatanaka came to Soka, a Japanese Buddist institution, in 1990 and had a "Big 7" accounting firm background. According to prosecutors, Hatanaka had a gambling problem.

Read the story here and here.

In this case, the head of finance, Hatanaka, who had complete access to all of Soka's accounts, simply treated the institution as his own piggy bank. He reportedly had no prior criminal background. We suspect that there were few controls in the finance department he controlled. Even so, he probably could have circumvented them, given his position. New proceedures have since been put in place requiring multiple signatures. Nevertheless, this is a tough one to stop. The scheme was revealed when Soka's bank notice suspicious activities and notified Soka who contacted the FBI who conducted the investigation. Had the gambling problem come to the attention of colleagues, extra scrutiny may have been levelled at Hatanaka which may have nipped the fraud earlier.