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METI vet fined ¥11 million for Elpida trades

Stock buys based on news, not inside data: defendant

by Tomohiro Osaki

Staff Writer

The Tokyo District Court on Friday handed down a suspended 18-month prison sentence and an ¥11 million fine to a former veteran trade ministry official for insider trading in the 2009 state-led bailout of Elpida Memory Inc.

The court fined Masaaki Kimura, who served as deputy director general of the ministry’s Commerce And Information Policy Bureau, ¥1 million and levied an additional penalty of around ¥10 million.

His sentence was suspended for three years.

Presiding Judge Daisaku Kaneko charged Kimura’s crime had “undermined general investors’ trust in the perceived fairness of stock markets as well as in the professionalism due of national (public) servants.”

He also said Kimura’s action “has grave social implications and might lead to similar crimes by copycats.”

Kimura’s lawyers said he will appeal the decision.

However, the disgraced former bureaucrat issued a statement Friday admitting, “I am responsible for being suspected of violating the law and causing a lot of trouble.”

According to the court, Kimura repeatedly purchased shares in struggling chip-maker Elpida in May 2009, taking advantage of his position to obtain undisclosed information about the company’s planned bailout.

Kimura also bought stock in semiconductor maker NEC Electronics Corp. in April 2009 before its merger with Renesas Technology Corp. was made public.

He carried out all of these transactions under his wife’s name, eventually reaping profits of about ¥2.3 million in total.

The focus of the trial was on whether early, unconfirmed media reports of Elpida’s bailout and NEC Electronics’ merger with Renesas should be deemed to have turned the plans into public knowledge.

Ultimately, the judge ruled that “prior newspaper reports cannot be considered facts widely made public for general investors.”

Soon after the court’s decision, the Ministry of Economy, Trade and Industry issued a statement, saying, “We are extremely sorry to hear the ruling and would like to offer a sincere apology to the Japanese public.”

The ministry added that it will closely monitor Kimura’s appeal.

After entering a plea of not guilty, Kimura consistently stressed his actions were not based on insider information but merely on what knowledge he had garnered from the media.

But the prosecutors argued that none of the media reports cited by Kimura had been fully authenticated by officials of the companies involved, suggesting the reports were untrustworthy.

Prior to Kimura’s purchase of NEC Electronics shares, a newspaper claimed the ailing manufacturer was in talks over a merger but the company soon denied the report’s authenticity.

As for Elpida’s state-backed bailout, the first report that the government was planning to fund the company broke in February 2009 — three months before Kimura bought the shares. Soon after, Elpida issued a statement hinting it would “study the possibility” of recapitalization should such a bailout deal be floated.

The prosecutors, however, said the firm’s statement was too equivocal to be considered official confirmation of Elpida’s recapitalization, and argued it therefore didn’t exonerate Kimura.

The state-run Development Bank of Japan subsequently invested some ¥30 billion in Elpida to keep it afloat.