Tokyo public prosecutors on Tuesday arrested Mr. Mototaka Ikawa, former chairman of Daio Paper Corp., on suspicion of causing financial damage to four subsidiaries by taking out massive loans from them for personal use on gambling. The arrest came two months after he suddenly stepped down.

He is suspected of having instructed executives of the subsidiaries to remit a total of ¥3.2 billion, in seven installments between July and September, to various bank accounts, including his own and those of companies related to casinos overseas, without indicating how he would use the money. The loans were extended without approval by the companies' boards and without collateral. Not only Mr. Ikawa but also the board members should be criticized for such irresponsible behavior.

The in-house investigative committee of Japan's No. 3 paper maker has found that Mr. Ikawa borrowed a total of ¥10.68 billion from seven subsidiaries between May 2010 and September 2011. He also borrowed ¥530 million from a Daio-affiliated firm.