Japanese regulators punish Nomura, Dai-Ichi Kangyo
TOKYO (AP) _ Japan’s biggest brokerage and a top bank at the center of a racketeering scandal were slapped today with the harshest penalties ever meted out by the country’s financial regulators.
The punishments will shut down key divisions of Nomura Securities Co. and Dai-Ichi Kangyo Bank Ltd. until the end of the year, the Finance Ministry announced.
Nomura and Dai-Ichi Kangyo are accused of paying off a reputed corporate racketeer _ Ryuichi Koike _ to keep him from revealing company secrets and scandals or disrupting shareholders’ meetings.
Under the penalties, Nomura will be forced to stop the lucrative business of trading stocks on its own account until the end of the year. The brokerage will not be allowed to underwrite government bonds for the period.
Nomura’s headquarters also will be closed for a month and the company will be banned from all stock transactions for a week.
Dai-Ichi Kangyo Bank will be barred from making any new loans to businesses for five months, the ministry said. The bank is banned from underwriting government bonds and will be barred starting next month from setting up new branches or businesses anywhere in the world for a year.
Nomura’s president, Junichi Ujiie, said today he accepted the punishment and would make sure the company does not make the same mistake again.
``Through this inappropriate act, we caused a loss of faith in the securities market and greatly inconvenienced our clients,″ Ujiie told reporters. ``For this we are sincerely sorry.″
Ujiie said it was impossible to estimate how much the penalty would cost the company, but that ``we will surely lose business″ as a result.
Analysts said Nomura will be hit much harder than Dai-Ichi Kangyo. The penalties likely will reduce Nomura’s revenues for the year by one-third, said Brian Waterhouse, an analyst at James Capel Pacific Ltd. Profits will suffer more because the company will have to pay employees during the shutdown.
Dai-Ichi Kangyo will suffer less because most of its revenue comes from outstanding loans and ``incremental new loans are not that important,″ said Betsy Daniels, an analyst at Morgan Stanley.
She estimated the penalty will erode the bank’s operating profit by 5 percent or less.
Nomura reported a net loss last year of $2.29 billion, largely because of writing off bad loans at an affiliated company.
The scandal surrounding Koike widened today when prosecutors raided the head office of Yamaichi Securities Co., another top brokerage. Yamaichi is suspected of funneling about $679,000 to Koike in 1995.
Nationally broadcast TV footage showed dozens of dark-suited investigators entering the company’s headquarters in central Tokyo. Prosecutors also searched several other offices related to Yamaichi, local media reported.
Executives of Nomura and Dai-Ichi Kangyo already have been charged with illegally channeling money to the alleged racketeer and face separate criminal penalties including jail time and fines.
Ujiie acknowledged last week that his company violated the law by making payments to Koike, reputed to be a corporate racketeer, known as ``sokaiya.″
Sokaiya buy a nominal amount of stock in target companies to gain entry to shareholders meetings and then threaten to raise embarrassing questions about executive sex scandals or losses at subsidiaries if not paid off in advance.
Nomura is accused of maintaining a special profit-guaranteed investment account for Koike, at shareholders’ expense, to keep him quiet. Koike has been charged with illegally accepting a payoff of more than $400,000 from Nomura in 1995.
Four senior Nomura managers including former president Hideo Sakamaki have been arrested in connection with the case.
Dai-Ichi Kangyo allegedly extended more than $100 million in illegal loans to Koike. Eleven bank managers have been arrested in the case and the bank’s former chairman hanged himself last month in the face of further questioning.
It has not been specified what kind of threat Koike allegedly posed to Nomura or Dai-Ichi Kangyo.
Public prosecutors indicted the bank Monday on charges it hid some of the loans from Finance Ministry regulators in 1994.
The Nihon Keizai newspaper said all of Japan’s ``Big Four″ brokers _ Nomura, Yamaichi, Daiwa Securities Co. and Nikko Securities Co. _ maintained special accounts in the name of Yoshinori Koike, Ryuichi’s younger brother, and an acquaintance.