We will explore what happened with the Los Angeles Dodgers’ superstar pitcher, how common situations like this are, how the fraud occurred, and how to prevent it from happening in the future.
What Happened?
According to a federal indictment and a guilty plea, Ippei Mizuhara, Shohei Ohtani’s interpreter, unlawfully transferred more than $16 million from Ohtani’s bank account at a bank in Arizona to pay his gambling debts to an illegal bookmaking operation. In 2018, he accompanied Ohtani, who does not speak English, to an Arizona bank to open an account to deposit his paychecks. During the account setup, Mizuhara translated for Ohtani. In September 2021, Mizuhara began gambling with an illegal sports book and lost millions of dollars. According to ESPN, he changed the contact information on the bank account from Ohtani to himself by telephoning the bank and identifying himself as Ohtani, thereby tricking the bank employees into authorizing wire transfers from Ohtani’s account to the illegal gambling operation. Over the next two years, from November 2021 to January 2024, Mizuhara wired over $16 million from the account to the bookmaker. Then, from January 2024 to March 2024, Mizuhara used the same account to purchase approximately 1,000 baseball cards via eBay and Whatnot, which cost approximately $325,000. In total, Mizuhara stole almost $16.5 million until he was caught by federal investigators.
How Common Is Theft From Athletes and Celebrities?
The Ohtani case is not the first massive fraud to be committed by a known associate and will NOT be the last. Believe it or not, there are many cases where athletes and celebrities have been duped by known associates for large sums of money. In a 2021 report, consulting firm E&Y reported that athletes lost over $600 million between 2004 and 2019. Typically, these frauds occur when the athlete or celebrity gives control to one trusted individual and/or they have minimal understanding or focus on their own finances. Some notable examples in addition to Ohtani include in 1989, musician Billy Joel sued his former manager for $90 million, claiming fraud and breach of fiduciary duties, and in 2015, former NBA basketball star Tim Duncan sued a former financial advisor for siphoning $20 million from his accounts.
How Did the Ohtani Fraud Happen?
This theft occurred for four reasons:
- Mizuhara gained control of Ohtani’s finances without any supervision over his actions. How did Mizuhara gain control? Ohtani did not speak English, which was a factor. In addition to being Ohtani’s translator, Mizuhara made himself indispensable to Ohtani, performing various other personal services for Ohtani. With this control, he allegedly told Ohtani’s other advisors and accountants, who did not speak Japanese, that Ohtani denied them access to the account.
- The bank failed to follow proper procedures. The bank allowed Mizuhara sole access to the account. There was no requirement for Mizuhara to receive approval or authorization from Ohtani or a representative of Ohtani to access the account. The constraint of additional approvals or authorizations would have blocked Mizuhara’s sole access to the money. Typically, when someone is given the ability to initiate transfers, there is a limit on the dollar amount of the transfers that can be made before dual authorization is required.
- Ohtani had no system in place to ensure that money was not improperly taken and, if it were, to detect it quickly.
- Ohtani either had no understanding of his finances and/or he paid no attention to them. A bookkeeper or accountant should have been preparing the books and records and reconciling the bank accounts that would have identified these fraudulent transfers. After the books and records were prepared and the bank accounts reconciled, another accountant should have been tasked with reviewing the books and records as well as the reconciliations to confirm their accuracy.
These systems and procedures are in place in small, unsophisticated businesses. Clearly, they should be in place for an athlete earning multi-millions of dollars per year.
How Can It Be Prevented?
This situation occurred in part because Ohtani did not speak English, and his advisors and accountants did not speak Japanese. As such, a Japanese-speaking accountant would have been helpful.
- Mizuhara should not have been allowed to gain control of Ohtani’s finances without any supervision over his actions.
- The bank should not have allowed Mizuhara sole access to the Ohtani’s account.
- Ohtani should have had a bookkeeping and accounting system in place with sufficient internal controls to ensure that money was not improperly taken and, if it were, to detect it quickly.
- Ohtani should have been financially literate and paid attention to his finances. He should have reviewed any work prepared by accountants to confirm the accuracy of the account activity.
Withum’s Forensic and Valuation Services Team establishes and maintains bookkeeping and accounting systems designed to prevent fraud and detect it if it occurs. Our auditors will review your system if you suspect you have weak internal controls, and our forensic accountants will investigate fraud if you believe you have been a victim of fraudulent activity. We can teach financial literacy; however, in the end, everyone is responsible for their finances. As such, it is imperative to maintain control and pay attention to their finances.
Author: CJ Pulcine, CPA | [email protected]
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For more information on this topic, please contact a member of Withum’s Forensic and Valuation Services Team.
