Two former executives of Nikko Securities Co. were arrested Oct. 21 for allegedly compensating a "sokaiya" corporate extortionist's stock losses.The arrests came after the Securities and Exchange Surveillance Commission filed a criminal complaint with prosecutors against Nikko as well as executives Hiroyuki Hamahira, former Nikko executive director, and Akitoshi Ikeda, former chief of the firm's general affairs department.Nikko is suspected of violating the Securities and Exchange Law by offering 14 million yen in compensation to sokaiya Ryuichi Koike in 11 installments from Jan. 30 to Dec. 28, 1995, according to sources close to the case.The complaint, given to the Tokyo District Public Prosecutor's Office, also covered Koike.Prosecutors questioned the former executives on those charges and a suspected violation of the Commercial Code for offering financial favors to a sokaiya.Prosecutors and SESC investigators raided Nikko headquarters and other offices late last month. The brokerage's chairman and president resigned earlier this month to take the blame for the growing scandal.Nikko was the third brokerage that the securities watchdog has linked to payoffs to Koike, following industry leader Nomura Securities Co., and Yamaichi Securities Co.Daiwa Securities Co., the last of the Big Four to become involved, has also been raided by prosecutors over its relations with Koike.Investigators allege that Nikko transferred profits made through its securities transactions to an account held by a firm operated by a friend of Koike's, making it appear as though the orders were placed by the racketeer.Sources said Koike demanded compensation for losses amounting to roughly 100 million yen, including nearly 79 million yen suffered through transactions involving Tokyo Electric Power Co. shares.Koike also allegedly had a discretionary account at Nikko starting in 1993, under which the brokerage made transactions without orders from the client. Such accounts are forbidden under the Securities and Exchange Law.Koike, who is already under arrest, is the key figure in a wide-sweeping illicit payoff scandal that has so far implicated Dai-Ichi Kangyo Bank along with the Big Four brokerages.
