2 Japanese banks linked to rigging of Tokyo stocks

October 14, 1990|By John E. Woodruff | John E. Woodruff,Tokyo Bureau of The Sun

TOKYO — Tokyo--Japanese businessmen, still struggling with the idea that there is no more easy money from the country's mammoth banks, are now learning that banks lent huge sums that helped rig prices on the Tokyo Stock Exchange.

The manager of a Sumitomo Bank Ltd. branch has been charged with receiving kickbacks and lending $167 million to a stock speculator. Prosecutors have named Sanwa Bank Ltd. as the source of an additional $239 million of the same man's financing.

Neither Sanwa nor any of its officials has been charged with wrongdoing.

Coming at a time when prices on the Tokyo Stock Exchange have collapsed and Japan's 12 banking giants face severe capital contractions, the still-growing scandal threatens to amplify the loss of confidence in two capital sources that have been central to the country's dramatic economic expansion of the past decade.

At its center is Mitsuhiro Kotani, who, with a longtime associate, is charged with manipulating a resort-development company's stock price.

Mr. Kotani, 53, is the head of Koshin Co., a real estate company. His associate, also indicted in the case, is Shuichi Yamamoto, 50, director of Joko Co., a construction company.

They are accused of working with officials of Tobishima Corp., a bigger construction company, to manipulate the stock price of Fujita Tourist Enterprises Co., which is traded on the Tokyo exchange.

According to prosecutors, in May 1989 the scheme succeeded in driving Fujita's price up to 4,200 yen from 2,200 yen.

In April, the prosecutors allege, the same group worked with five brokerage houses, driving Fujita's stock price up to 5,200 yen a share.

Last Sunday, the scandal claimed its first victim, Ichiro Isoda, chairman of Sumitomo Bank, who, in the Japanese tradition, resigned to "accept responsibility" for the branch manager's alleged wrongdoing.

Earlier, as the scandal began to surface, Daiwa Securities co., Japan's second-largest stock brokerage, and Scrimgeour-Vickers International, a Citicorp entry in the market here, were among four houses suspended and fined on charges they helped Mr. Kotani.

But the longer-term victim may turn out to be the business community's self-confidence.

The scandal comes at a time when many investors are smarting from drastic losses and the Tokyo Stock Exchange, down 40 percent to 50 percent since the first of the year, is struggling to get a rally started.

The exchange's collapse, in turn, has been a key factor in threatening the ability of the world's 12 largest banks to meet an 8 percent capitalization requirement the Bank for International Settlements intends to impose in March 1993.

Last week, the Ministry of Finance acknowledged that the 12 cannot all hope to meet that standard soon, and it reduced its own interim requirement from 8 percent to just over 7 percent.

In Japan's inbred business world, where long-term corporate and personal relationships are often cited as a key strength, the prosecutors portray Mr. Kotani as a man who was more than just a speculator operating from outside the system.

The picture painted by the prosecution, in excerpts that Tokyo newspapers published from the positions government lawyers took at Mr. Kotani's arraignment, is of a man who was able to call on support from deep inside the business establishment.

He allegedly used some of the profits from the manipulation scheme to pay off loans he took out in 1988 during a hostile takeover of a surveying company.

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