A former president of the now-defunct Kokumin Bank pleaded not guilty Thursday to charges that he extended loans illegally to a karaoke-parlor management company between 1997 and 1998.
In his first hearing before the Tokyo District Court, Yukio Okonogi, 66, denied committing aggravated breach of trust by illegally extending loans to Kami Palace of Mitaka, Tokyo, with virtually no collateral.
Okonogi and Hideyuki Suzuki, 66, a former vice president of the second-tier regional bank, were indicted on charges of violating the Commercial Code.
According to the indictment, Okonogi and Suzuki unlawfully extended loans totaling 9.05 billion yen to Kami Palace on 20 occasions between July 1997 and June 1998, even though they knew the company would be unable to repay. ,and thus caused massive losses to the bank.
Kami Palace later went bankrupt, while the bank collapsed last April.
“I never intended to benefit myself and the recipient of the loans by disregarding my duty,” Okonogi claimed.
He said he was aware that Kami Palace might find it difficult to repay the loans and was also aware of problems that may arise from lending with almost no collateral.
However, he said that in addition to the substantial loans that had not been repaid, the bank continued to extend loans to Kami Palace as a measure to prevent the company from collapsing.
“Many banks regularly extend loans to companies facing financial crisis without sufficient collateral. Do presidents of these banks all commit special breach of trust?” Okonogi asked.
At the hearing, Suzuki also denied unlawfully providing loans to the karaoke firm.
Kokumin Bank started lending to the karaoke company in 1995. In that year, the late Kenji Osano, Kokumin Bank’s former chairman and the once-owner of its largest shareholder, Kokusai Kogyo Co., introduced the president of the karaoke firm to bank officials, industry sources said.
Okonogi continued lending because he deeply admired the business ability of Kami Palace’s president. He also counted on assistance from Kokusai Kogyo — a bus, transport and leisure company — and its affiliates, the sources said.
Yachiyo Bank, a Tokyo-based second-tier regional bank, is to take over the operations of Kokumin Bank.
Kokumin Bank’s administrator has filed a damages suit against Okonogi and 10 other former senior officials of the bank, seeking a total of 1.04 billion yen for losses caused by illegal lending in four other cases.
Police will soon summon several executives of Shohkoh Fund & Co., a Tokyo-based “shoko” nonbank moneylender, to investigate whether the company’s management instructed employees to use illegal methods to improve lending records, police sources said Thursday.
Police may also summon Kenshin Oshima, president of Shohkoh Fund, the No. 2 shoko loan company, in connection with the arrest of an employee of the firm Wednesday, the sources said. Shoko loans require no collateral, charge high interest and require a third-party guarantor.
The Metropolitan Police Department arrested Yoshifumi Kubota, a section chief, on suspicion of completing a loan-guarantee contract in the name of another man without the man’s knowledge and forging the man’s signature on the contract.
Kubota, 41, is suspected of failing to provide contract papers to the man, who is 53 and hails from Tokyo, when the suspect allegedly filled out the contract in May 1997, police said.
The contract was intended to make the man responsible for paying back 21 million yen lent to a real estate company in the event that the original debtor was unable to repay.
The law on nonbank moneylenders obliges such lenders to provide contract papers.
Kubota’s alleged filling in of the contract papers himself constitutes “forgery of a private document with a signature or seal,” police said.
The man filed a criminal complaint against Kubota and Shohkoh Fund on Wednesday, saying he was made a loan guarantor without his approval and knowledge.
Lawyers said he learned of the incident after the real estate company went bankrupt in February 1998 and Shohkoh Fund filed a lawsuit against him in December that year to seek the right to take out a mortgage on his house.
Shoko loans are typically extended to small businesses without collateral so long as they are guaranteed by a third party, mostly individuals in a personal capacity.
The Tokyo company and Kyoto-based Nichiei Co., the industry’s largest such lender, have come under fire for their heavy-handed loan-collection methods, which have led to arrests.
Employees of the two firms have complained of severe sales quotas imposed by management and claimed they were not paid for overtime.
According to a recent report submitted by Shohkoh Fund to financial authorities, the average time spent working at the company by employees is 22 months.