TOKYO -- The former head of the world's biggest securities firm testified yesterday that his company lent a top gangster $117 million that helped him corner a big rail line's stock, then "excessively" pushed the shares to other clients.
The firm's actions helped push the stock to a record high and enabled the gangland boss to reap an unknown but admittedly huge profit on an accumulation of 2.6 million shares, said Setsuya Tabuchi, who resigned as chairman of Nomura Securities last month.
However, he insisted that "there was absolutely no manipulation" of the railway stock.
Mr. Tabuchi's testimony was the first high-level confirmation ever given to foreign brokers' widely voiced suspicions about how far Japan's "Big Four" brokerage houses will go to please big clients. Critics say the Big Four regularly use their financial muscle to run a company's stock prices radically up or down through published buy and sell recommendations and calls to customers by their thousands of brokers.
During the fall of 1989, the period under investigation, stock in Tokyu Corp., a major private railway,soared by nearly 1,000 yen to reach a record 3,060 yen a share, which it has never since approached. *
Under questioning by a special committee of the Diet, Japan's parliament, Mr. Tabuchi admitted all the facts of which Nomura has stood accused for more than two months, but he relied on a technicality of Japan's securities law to argue that the facts do not add up to the offense the committee is probing.
The reason Nomura's help to Susumu Ishii, a notorious "yakuza" gangster, did not constitute manipulation of the market, he argued, was that the firm managed not to exceed Japan's 30 percent limit on the total portion any one house could do in a month's trading in any one company's shares. Nomura handled about 24 percent to 26 percent of trading in Tokyu stock during the period under investigation, he said.
After weeks of deep depression while waiting for Mr. Tabuchi's testimony, the Tokyo Stock Exchange reacted with relief but no enthusiasm when he left the witness stand.
The Nikkei 225-stock index rose 380.54 points to close yesterday at 22,002.17 -- its best gain in a week. But trading was virtually lifeless.
In the first half-hour of trading today, the Nikkei gained 261.64 points, or 1.19 percent.