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Probe of Nomura Widens; Report Says Suspension Considered

September 4, 1991

TOKYO (AP) _ Japan’s finance minister said Tuesday his ministry is expanding its inquiry of Nomura Securities Co., which allegedly recommended a railway company’s stock after a client with underworld connections bought a large stake.

Also Tuesday, a Socialist lawmaker said a Finance Ministry document he obtained shows that Nomura, the world’s largest brokerage, drove up the price of Tokyu Corp. shares, earning the underworld figure millions of dollars.

Finance Ministry officials said the document was not an official ministry report. But Kyodo News Service quoted an unidentified Finance Ministry official as saying the ministry is considering temporarily suspending Nomura from conducting business for the alleged stock manipulation.

Neither the report nor Finance Minister Ryutaro Hashimoto, testifying in Parliament, explicitly accuse Nomura of stock manipulation, which is illegal in Japan. But he said ″there were problems″ with its trading of Tokyu Corp. shares, and that his ministry was investigating its trading activities.

Since the far-reaching stock scandal broke out in Japan two months ago, Hashimoto, a prime minister hopeful, has been under pressure to resign to take responsibility for the ministry’s loose supervision of the securities industry.

Socialist Toshihisa Matsuura said the document he obtained concludes that Nomura began pushing up Tokyu share prices after purchases by Susumu Ishii, the former boss of Inagawa-kai gangster group.

Ishii, who died Tuesday at a Tokyo hospital at age 67, had bought 10 million shares of Tokyu stock from Nomura and 14 million shares from Nikko Securities Co. between April and August 1989, according to the document.

The document, circulated by Matsuura, says Ishii gained $5.9 million in profits by selling back part of his Tokyu holdings shortly before the issue registered its high on Nov. 17, 1989, at about $22. He had bought the stock at between $11 and $13.

Allegations that the brokerages bumped up stock prices to benefit Ishii and that they compensated favored clients for market losses have created a storm of protest among smaller investors.

Former Nomura Chairman Setsuya Tabuchi denied last week before a lower house committee investigating the scandal that Nomura had illegally manipulated stock prices.

He also denied separate allegations that Nomura compensated favored clients for trading losses after March 1990, when share prices on the Tokyo stock exchange began to plunge drastically.

Such compensation is illegal if promised in advance.

However, Nobuhiko Matsuno, head of the Finance Ministry’s Securities Bureau, testified Tuesday that ministry investigators have evidence showing that Nomura may have compensated clients after March 1990.

Hashimoto also told Parliament that his ministry is considering a revised securities law that would allow authorities to confiscate the profits of ″dubious clients″ who profited through illegal transactions.

Senior officials of Nomura, Nikko, Daiwa and Yamaichi securities, as well as presidents of three major banks involved in a series of bank fraud scandals, are to testify in Parliament’s upper house Wednesday and Thursday.

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