Shokei Arai, a Lower House member of the Liberal Democratic Party, admitted in the Diet on Friday that he made about 41 million yen through an account he asked Nikko Securities Co. to open in the name of one of his acquaintances.Arai insisted, however, that the trades were not illegal. Speaking as an unsworn witness before a session of the Lower House Budget Committee, Arai said he did not know that having an account under another person’s name at a brokerage violated a voluntary rule in the securities industry.”I did not know that the industry had such an inside rule when I opened the account in 1995. I am sorry for troubling those at Nikko about it,” he said.Arai also said he feels morally responsible for his actions. However, responding to a question posed by fellow lawmaker Keiji Furuya, Arai indicated that he will refuse to leave the party or resign as a lawmaker, saying he has done nothing illegal.But many of Arai’s LDP colleagues did not seem convinced by his denials. During a meeting of the Executive Council of the party later in the day, many said he should at least leave the party. LDP Secretary General Koichi Kato decided to meet with Arai on Monday to urge him to voluntarily resign from the LDP.Arai, 50, was summoned to the Diet to testify in connection with allegations that he received illegal profits from Nikko through dubious equity investments. During the hearing, Arai denied the allegations and said he had never demanded that the brokerage pass on profits to him.Arai, a Finance Ministry bureaucrat-turned-politician, told the session that he made the profits between October 1995 and February 1997 through what he described as “normal stock dealings” on his account with the firm. “I never pressured the firm to provide me with illegal profits and never received any requests from the brokerage to pressure the administration to give favorable treatment to the firm,” Arai said.Arai said he opened the account with the firm and deposited a total of 120 million: yen 100 million yen that he borrowed from one of his supporters without collateral and 20 million yen from his personal savings, he said.Yukio Ubukata, a member of the opposition group Minyuren, said it is believed the brokerage put profits into Arai’s account in an illegal manner because Arai made as much as 41 million yen in profits in only 1 1/2 years, during which stock prices in Japan increased only 3.5 percent on average. Arai responded, “If any wrongdoings are revealed by investigators, I will take off my lawmaker’s lapel pin.”But he did admit and apologize for failing to report the borrowings and stock holdings to the Lower House. By law, lawmakers are required to report to the chamber their personal assets, including debts.The committee also summoned Masashi Kaneko, president of the brokerage, and Hiroyuki Hamahira, former managing director of Nikko in connection with the allegations. Kaneko said there were about 130 stock transactions in Arai’s account, including 12 single-day purchases and sales of stocks in one firm, resulting in a profit of about 12 million yen. Discretionary securities trading is prohibited under the Securities and Exchange Law.
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