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Tokyo prosecutors arrested four executives of Daiwa Securities Co. on Tuesday for allegedly compensating a “sokaiya” corporate extortionist for investment losses in violation of the Commercial Code and the Securities and Exchange Law.

The arrests complete the circle of Big Four brokerage arrests stemming from one sokaiya, Ryuichi Koike. The Daiwa Securities executives are suspected of compensating Koike to the tune of 203 million yen from Jan. 9 to Dec. 21, 1995, through two accounts, one in the name of a firm run by the racketeer’s brother and the other under the name of a friend.

Those arrested were identified as former general affairs department managers Yasuo Terashima, 60, Soichi Tada, 51, and Naoyoshi Kito, 60; and 54-year-old Nobuhiro Kaneda, manager of the investment equities department.

In connection with the case, prosecutors raided the home of Motoo Esaka, 62, former president of Daiwa Securities, in Kamakura, Kanagawa Prefecture. They also searched the home of Hiromitsu Sogame, former Daiwa Securities vice president, on suspicion of violating the Commercial Code and the Securities and Exchange Law in connection with the case.

The Securities and Exchange Surveillance Commission filed a criminal complaint with the Tokyo District Public Prosecutor’s Office earlier in the day against Daiwa Securities and the four executives. The securities watchdog has now taken action in the affair against all of the Big Four brokerages: Daiwa, Nomura Securities Co., Nikko Securities Co. and Yamaichi Securities Co. Criminal complaints lodged against the three other brokerages have each resulted in arrests.

Koike, who is also under arrest, incurred losses of 340 million yen as of January 1994, mainly due to the fall in value of his East Japan Railway Co. stock, which he purchased when it was first listed in October 1993. Although he expressed interest in purchasing the shares, he strongly demanded the losses be compensated by Daiwa when the stock price plummeted, sources alleged. Daiwa, like its Big Four counterparts, transferred profits made through stock transactions on its own account to Koike to make it appear as though he placed the original orders, the sources said.

The Finance Ministry said Tuesday it would forbid Daiwa Securities Co. from bidding and underwriting government bonds pending administrative punishment for its alleged involvement in a loss-compensation scandal. Similar bans are already in effect against the other Big Four brokerages for the roles they played in the far-reaching fiasco.

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