AIJ chief, others held in pension funds fraud

Clients bilked; entrusted assets in the billions lost

Kyodo

The head of AIJ Investment Advisors Co. was arrested Tuesday in connection with alleged fraud involving the loss of more than ¥100 billion in pension assets entrusted to the firm, police said.

AIJ President Kazuhiko Asakawa, 60, is suspected of swindling two corporate pension funds out of ¥7 billion by presenting false investment performance records last year, the police said.

The Tokyo police also arrested three of Asakawa’s alleged accomplices: Hideaki Nishimura, 56, president of ITM Securities Co., which is effectively under AIJ’s control; Shigeko Takahashi, 53, an AIJ executive; and Yasukazu Kosuge, 50, an ITM Securities executive.

The police raided more than 20 locations linked to the suspects, including AIJ headquarters, while the Securities and Exchange Surveillance Commission also searched several locations in an effort to learn the scope of the fraud.

The four suspects allegedly concluded discretionary investment contracts with the two corporate pension funds and sold investment trust funds after presenting false investment performance records to them between June and August 2011. They also asked that the two funds transfer about ¥7 billion to ITM Securities’ bank account, the police said.

The two funds that were believed defrauded included one for pensions of construction industry retirees in Nagano Prefecture, which paid about ¥6.5 billion to the AIJ side, and one for retirees of Advantest Corp. of Tokyo, which paid about ¥500 million.

AIJ began concluding such discretionary investment contracts with corporate pension funds around May 2003, and continued to do so even after its investment performance began deteriorating, investigative sources said.

A number of pension funds canceled their contracts after a journal on pension management warned of AIJ’s problems in February 2009, but AIJ subsequently concluded contracts with 92 more pension funds in order to use the freshly injected money to reimburse those funds that had canceled the contracts, the sources said.

Asakawa has denied any intention of committing fraud.

The SESC said earlier that AIJ accepted ¥145.8 billion in assets from pension funds and incurred ¥109.2 billion in investment losses as a result of bungled investments in derivative financial products.

Investigative sources said AIJ has only ¥11 billion that can be paid back to pension funds.

Asakawa, a former Nomura Securities Co. official, took over a subsidiary of a major U.S. financial firm and renamed it AIJ Investment Advisors in 2004 to launch management of pension funds on a full-fledged basis, industry sources said.

The Financial Services Agency ordered AIJ Investment Advisors to suspend its business in March after finding it had lost most of the pension assets entrusted to it. Later, the agency stripped AIJ of its registration as an investment adviser.

Both houses of the Diet summoned Asakawa and Nishimura to testify between March and April over the loss of the entrusted assets.

The welfare ministry said 74 pension funds had concluded contracts with AIJ as of the end of March 2011, of which two have already decided to disband due to the loss of their assets.

Financial services minister Tadahiro Matsushita said Tuesday he expects investigators to get to the bottom of the case.