LEAD: Bedding supplier chief given 18 years for investment fraud.

TOKYO, March 18 Kyodo

(EDS: ADDING INFO AT 4-8TH GRAFS, ADJUSTING FIGURE IN 10TH GRAF, CHANGING 'ENTEN' TO LOWER CASE AS IN OTHER CURRENCIES)

The founder of the now-defunct Tokyo-based bedding supplier L&G K.K., known for its own ''enten'' quasi-currency, was sentenced Thursday to 18 years in prison for defrauding investors of 327 million yen from 2006 to 2007.

Kazutsugi Nami, 76, swindled 31 investors between July 2006 and January 2007 by promising 36 percent annual returns on a 1 million yen investment, which was also guaranteed, although he had no means to finance such payments, the Tokyo District Court ruled.

The defense counsel for Nami, who sought acquittal, appealed the ruling later in the day.

The 18-year term matches the penalty demanded by prosecutors, who accused the defendant of being the ultimate architect of the organized fraud.

Nami ''made the damage greater from his single absolute position,'' the court said, though it recognized a relatively small portion of the roughly 54.6 billion yen in total fraud losses which the firm's bankruptcy administrator says have been suffered by some 32,000 people.

''L&G was a company under one-man management where the defendant made decisions and took control of every management policy, and the range of its moonshine schemes have been worked out and run by employees also at his discretion,'' Presiding Judge Hiroyuki Yamaguchi said.

''Despite acknowledging that bankruptcy was imminent, the defendant made employees go on collecting investments,'' Yamaguchi said, noting, ''No employees were able to challenge him.''

''His criminal responsibility is considerably heavy compared with those of other accomplices as he not only received 9 million yen in monthly remuneration but boasted that the company's money was his own and wasted L&G's assets for his personal greed,'' the judge said.

During the trial, Nami said the schemes were not fraudulent as he believed his enten currency would be adopted by the government or in other countries, and his defense said he had no criminal intent to operate a scam.

Aside from Nami, 21 people including former L&G executives have been convicted in the case in district court trials but 16 of them have appealed the rulings while four others have accepted them.

Established in 1987 by Nami, the company initially sold bedding as well as products for health purposes, but began collecting investments by promising high dividends and issuing enten money around 2001.

Following an increase in membership through such marketing efforts as organizing free concerts of popular singers, it focused on gathering investments after scrapping merchandise sales in 2006, but stopped dividend payments and began bankruptcy proceedings in 2007.

It is believed to have swindled about 32,000 people out of some 54.6 billion yen in total, but lawyers and the bankruptcy administrator have so far recovered only about 250 million yen, they said. The lawyers are planning to file a damages suit against those convicted.