The Tokyo District Court sentenced a former president of leading Chinese medicine maker Tsumura & Co. to a suspended three-year prison term for arranging 7 billion yen in collateral-free loans to a former subsidiary.

Akira Tsumura, 64, was sentenced to three years in prison, suspended for four years, for aggravated breach of trust by guaranteeing loans to subsidiary Tsumura Shoji without the authorization of the company’s executive board.

In the same trial, Heikichi Ito, 52, former executive director of Tsumura Shoji, was sentenced to three years in prison, while Hirotsugu Shibata, 60, former Tsumura Shoji president, was sentenced to a 20-month term, suspended for three years, for similar charges.

Presiding Judge Hisaharu Yasui said Tsumura lacked a sense of responsibility and decided to guarantee the loans purely for his own gain.

According to the court, Tsumura Shoji received 7 billion yen in loans from four financial firms between July 1993 and February 1994.

Tsumura conspired with other defendants to hand over statements, saying that herbal medicine maker Tsumura would guarantee the loan repayments to the four lenders, despite knowing that Tsumura Shoji did not have the ability to repay the loans, the court said. Tsumura Shoji is no longer a subsidiary of the Chinese medicine firm.

In exchange for guaranteeing the loans, Tsumura received some 720 million yen, which he spent to buy villas in suburban Los Angeles and in Ito on the Izu Peninsula, it said.

Yasui added that Tsumura’s responsibility was grave because he benefited from the act by receiving money at a time when his company was suffering losses.

Ito, who was also president of the real estate company Seiso, did not receive a suspended sentence because he effectively masterminded the whole scheme and funneled some 3 billion yen to Seiso, the judge said.

The defendants pleaded not guilty in April 1997, admitting they provided loan guarantees without the board’s authorization but claiming they had no intention of promoting their own interests through it.

Prosecutors had demanded four years in prison for Tsumura and Ito and two years for Shibata.