Hideo Sakamaki, a former president of Nomura Securities Co., was arrested by Tokyo prosecutors on May 30 on suspicion of approving illegal payoffs to a “sokaiya” corporate racketeer. Sakamaki, 61, is suspected of having conspired with former managing directors Shimpei Matsuki and Nobutaka Fujikura, and a general affairs department official, Osamu Fujita, in paying 38.5 million yen in profits to sokaiya Ryuichi Koike, 54, in March 1995.

Prosecutors picked Sakamaki up at his home in Tokyo’s Shibuya Ward early May 30 on suspicion of violating the Commercial Law and the Securities and Exchange Law, and brought him in for questioning as part of the investigation into the scandal. Sakamaki was later sent to the Tokyo Detention House.

Prime Minister Ryutaro Hashimoto said the arrest will jolt the nation’s securities industry. “It is not important whether or not he was arrested. What matters is that the leader of a top-ranking company has caused a problem like this,” Hashimoto said.

At a news conference at the Tokyo Stock Exchange, Junichi Ujiie, who succeeded Sakamaki as president last month, did not deny the company’s wrongdoing. However, Sakamaki reportedly told investigators that he was not guilty regarding the payoff case, prosecution sources said. Prosecutors will shortly question former Nomura Chairman Setsuya Tabuchi, 73, and former President Yoshihisa Tabuchi, 64, on their alleged involvement in the scandal, they said.

Nomura is believed to have given funds to Kojin Building Co., a real estate company run by Koike’s younger brother, Yoshinori, in the form of profits from preferential stock deals as compensation for investment losses, prosecutors said.

The Commercial Law bans payments to sokaiya, who buy shares in companies to gain access to shareholders’ meetings, which they threaten to disrupt unless they are paid off. The Securities and Exchange Law bans securities companies from compensating clients for investment losses and from conducting discretionary stock deals on behalf of investors.

Sakamaki told the Diet that he met Koike in the spring of 1992, but that he had nothing to do with the payoffs, which he said were linked to other Nomura officials such as Matsuki and Fujikura. Matsuki, Fujikura and Fujita were arrested May 14 on suspicion of diverting between January and June 1995 49.7 million yen in profits to Kojin Building made by Nomura through discretionary stock transactions. Sakamaki was arrested for a particular 38.5 million yen payoff.

Nomura allegedly paid the money to ensure that its annual shareholders’ meeting in June 1995 would not be disrupted. At that particular meeting, the controversial return of the two Tabuchis to Nomura’s board of directors was approved. The two men previously resigned following a discretionary dealing scandal that tainted Nomura’s image along with other major brokerages in 1991.

Questions about Nomura’s “VIP” accounts, allegedly designated for politicians, bureaucrats and other influential people, are likely to come up during prosecutors’ quizzing of Sakamaki, the prosecution sources said. The nation’s second largest bank, Dai-Ichi Kangyo Bank, has also been shaken by the payoff scandal. Prosecutors searched DKB’s headquarters and about 10 other establishments May 20 as part the payoff investigation. On May 23, DKB decided to replace President Katsuhiko Kondo with Ichiro Fujita, its vice president, and asked adviser Kuniji Miyazaki to retire.

Prosecutors are likely to look into breach of trust allegations against former and current DKB executives regarding the bank’s large loans to Koike, the prosecution sources said.

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