Pm On Attack Over Bank-gangster Scandal
The Age
Friday May 23, 1997
Tokyo, Friday
Japan's Prime Minister, Mr Ryutaro Hashimoto, today threatened to intervene in the Dai-Ichi Kangyo Bank scandal after disclosures that it lent tens of millions of dollars in unsecured loans to sokaiya racketeers.
Mr Hashimoto bitterly criticised the Finance Ministry for failing to detect a series of shady loans by the bank to two racketeers for the purchase of 300,000 shares in four brokerage companies and real estate investments.
According to a criminal complaint, the racketeers then extorted more than $500,000 from Nomura Securities, Japan's largest brokerage. At least $75 million of the loans aren't recoverable, the Japanese press says.
Dai-Ichi, one of the world's largest banks, is Japan's second largest commercial bank in terms of deposits and its oldest, having been in business since 1873.
The Prime Minister also rounded on the bank's senior management accusing them of "sneaky" behavior by deciding to resign before the scandal had been fully investigated by the prosecutor's office and before they had given an account of their decisions.
Even the Finance Minister, Mr Hiroshi Mitsuzuka, demanded that the bank's management remain in place to clarify the circumstances surrounding the shady loans. Among the directors to stand down were the president, Mr Katsuhiko Kondo, and the chairman, Mr Tadashi Okuda.
Dai-Ichi announced today that two of its vice presidents - Mr Ichiro Fujita and Mr Yoshiharu Mani - would take over the role of president and chairman respectively. The bank has promised to clean up the scandal.
Prosecutors are still interrogating Ryuichi Koike 54, and his 52-year-old brother Yoshinori after arresting them earlier in the week on suspicion of receiving $500,000 in payoffs from Nomura Securities. According to prosecutors, Dai-Ichi lent the brothers a staggering $60 million.
All the loans were placed in an account at the bank's Roppongi branch in Tokyo's notorious night club district. Although only $80,000 had been repaid, the bank had made no attempt to recover the loans which were paid progressively since 1989.
The scandals come at a bad time for the Hashimoto Government which is in the process of implementing its "Big Bang" reforms of the financial, currency and equities markets.
But the unfolding series of scandals is causing uncertainty amongst potential foreign investors and operators. Also, the activities of the sokaiya racketeers, who are usually linked to right-wing politicians and ultra nationalists, appear to be on the rise.
Their main method of operation is to buy shares in companies to gain access to shareholders meetings. Armed with inside knowledge about a company's illegal business dealings, or the personal lives of senior executives, they threaten to expose all if they are not paid off.
A key aspect of the top level investigations into Nomura and Dai-Ichi is to discover what the sokaiya had over the companies in the first place. It is thought that in the case of Dai-Ichi, the board was worried that sokaiya would disrupt a shareholders meeting in 1988 with questions about a breach of trust.
In that scandal a branch of the bank illegally handed over $35,000 to the president of a real estate company.
The ruling Liberal Democratic Party (LDP) announced this week that it intends asking senior Dai-Ichi officials to give evidence before a Diet investigation on the loan scandal.
Dai-Ichi has officially said very little about the allegations made by prosecutors after a raid on the bank's offices earlier in the week.
In other unrelated moves, prosecutors are also investigating so-called VIP accounts held by three Cabinet ministers at Nomura. It is believed the VIP accounts offered preferential treatment to selected customers.
Tokyo prosecutors, who arrested three former Nomura executives for shady dealings with the sokaiya, are believed to be examining the accounts closely to see what privileges might be attached to them. -- with agencies
© 1997 The Age