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Leman Bros. Group Said To Be Probed

May 20, 1999

TOKYO (AP) _ Japan’s financial watchdog agency has begun investigating the legality of certain derivatives transactions at three Japanese units of the Lehman Brothers group of the United States, media reported Thursday.

The probe was likely to focus on derivatives transactions designed to defer client losses on securities holdings and loans, the Nihon Keizai newspaper, Japan’s top business daily, reported.

The Financial Supervisory Agency would neither confirm nor deny the report. Lehman Brothers did not immediately return a call from The Associated Press to inquire about the reports.

The reported inspection would be only the second the agency has carried out of foreign financial institutions operating in Japan.

The latest investigation involved the Tokyo branches of Lehman Brothers Japan Inc., Lehman Brothers Global Asset Management KK and Lehman Brothers Bankhaus AG, the Nihon Keizai reported.

In January, the watchdog agency began investigating the Japanese operations of the Credit Suisse First Boston group for alleged improprieties in derivatives dealings. The agency is in the final stages of that investigation.

If any illegalities are found, possible penalties include suspension of operations, the Nihon Keizai said.

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