Nomura Securities Co. gave illegal payoffs of roughly 370 million yen to a “sokaiya” corporate extortionist as a token of gratitude for his refraining from disturbing its general shareholders’ meeting in 1995, the president of the brokerage acknowledged July 24 at an open Finance Ministry hearing.

Junichi Ujiie, president of the nation’s largest brokerage, said in-house investigations revealed that the Securities and Exchange Surveillance Commission’s discoveries of shady dealings were true. After the obligatory hearing, the first open to the media, the ministry was expected to hand the brokerage a severe administrative penalty — a move that could come as early as next week.

“We recognize that for the most part, the facts (as found by the SESC) are true, and it cannot be helped if it is determined that we gave financial favors to a customer,” Ujiie said in response to questions by ministry officials. The paybacks funneled to the sokaiya, Ryuichi Koike, through falsified stock and warrant transactions amounted to nearly 49 million yen, Ujiie said, while another 320 million yen went to the extortionist in the form of cash.

“It is a great embarrassment but we must admit that our company’s axis, upon which right and wrong were based, was warped,” he said, adding that there was a huge gap between the old way of thinking, which prevailed at the core of the firm, and the perceptions held by the general public. Last week, the securities watchdog advised the Finance Ministry to take punitive action against Nomura on the grounds that the firm violated the Commercial Code and the Securities and Exchange Law by offering the paybacks and for setting up a discretionary account for Koike, who has been arrested over the payoffs.

Ujiie told ministry officials that in late March 1995, when all shares in the discretionary account — made in the name of Kojin Building, a realtor run by Koike’s younger brother Yoshinori — were sold, roughly 330 million yen in losses were incurred. “In an effort to make up for part of this loss, the firm’s executives at the time, including our former president (Hideo Sakamaki), acted recklessly and transferred (transaction) profits and offered cash” to the sokaiya, he admitted. Later in the afternoon, Vice Finance Minister Takeshi Komura said the ministry would take strict measures against Nomura as stipulated under law.

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