AIJ Investment Advisors Co. President Kazuhiko Asakawa on Wednesday pleaded guilty to charges of defrauding pension fund clients out of ¥24.8 billion while concealing trading losses, but denied intending to line his own pockets.
“I apologize from the bottom of my heart to the pension funds and market players for causing serious trouble,” Asakawa, 60, said during the opening session of his Tokyo District Court trial.
“But I never intended to gain profit for myself or for my company,” the disgraced fund manager said.
According to prosecutors, AIJ misled 17 corporate and welfare pension funds about its investment performance to swindle them out of approximately ¥24.8 billion between February 2009 and January this year.
The Securities and Exchange Surveillance Commission, which searched the Tokyo-based firm in March, determined AIJ had lost ¥109.2 billion of the ¥145.8 billion in pension fund assets under its management. Asakawa was arrested in June on suspicion of fraud and of violating the Financial Instruments and Exchange Act.
Appearing in court Wednesday with Asakawa were former AIJ executive Shigeko Takahashi, 53, and Hideaki Nishimura, 57, the president of AIJ subsidiary ITM Securities Co.
While acknowledging he was aware of wrongdoing, Nishimura said the scale of the losses came as a surprise. He also denied conspiring with the other two.
In tears, Takahashi, who also had served as Asakawa’s secretary, pleaded guilty but told the court she was simply following the orders of her boss.
“I will plead guilty to all charges if what I did is legally deemed to be fraud,” she said.
Prosecutors meanwhile accused the three of “forming a conspiracy” to bilk clients.
Asakawa, a former manager at Nomura Holdings Inc., launched AIJ in 1989. But by 2009 the company was struggling, and lured new clients by promising high returns to keep afloat.
AIJ reportedly promised a 241 percent return to some clients through derivatives trading, mostly on Nikkei 225 options. Unaware of AIJ’s losses, small and midsize pension funds jumped at the chance.
Over the past nine years, AIJ generated profits of ¥2.7 billion, with Asakawa admittedly receiving an annual salary of ¥70 million as the head of his company. But he has repeatedly denied committing fraud for personal gain.
“I believed that it was my responsibility not to return the funds with losses” to clients, Asakawa told the court, explaining he used the money from new contracts to cover up the losses of the earlier clients.
“I am very sorry that I did such a foolish thing,” he said.
Responding to the fiasco, the labor ministry is preparing to abolish the employee pension insurance system in the near future.