The former president of Yamaichi Securities Co. said under oath Tuesday that a “hint” from a senior Finance Ministry official led the firm to compensate losses to a client and then hide them off its balance sheets.
The off-the-book debts eventually led to the brokerage collapsing last November. The firm, then one of Japan’s Big Four, closed for good at the end of March.
Atsuo Miki was giving sworn testimony before the House of Representatives Budget Committee regarding whether the bureaucrat, former Securities Bureau Director General Nobuhiko Matsuno, offered suggestions as to how to settle a compensation problem between Yamaichi and Tokyu Department Store Co.
Tokyu had — at Yamaichi’s request — accepted stock whose market value had fallen below book value and which had been transferred among a number of firms with different business years to keep the losses from surfacing, but the brokerage could no longer find a firm to relieve Tokyu of the burden.
Matsuno has already told the Diet under oath that the decision not to place the debts on the books was made by Yamaichi’s management and that he played no active role in that decision.
According to Miki, who apologized at the start of Tuesday’s session for Yamaichi’s failure, he was summoned to Matsuno’s office at the ministry around Jan. 22, 1992, and was asked what Yamaichi intended to do about the Tokyu Department Store matter. “I told him that our personnel were intending to do all they could, including taking (legal) action, to which he said ‘Daiwa (Securities Co.) seems to be planning to dispose of the losses overseas,'” Miki told the committee.
The former executive added that when he told Matsuno that he thought such a procedure would be problematic, the securities bureau chief suggested the matter be discussed with the deputy director general of the bureau. “I took it as a suggestion that the matter be settled internally. I saw (Matsuno’s earlier testimony) in the newspapers, and believed that his perception (of the meeting) was slightly incorrect,” Miki said.
He went on to say that his meeting with Matsuno led the brokerage to make an about-face regarding Tokyu’s losses, and instead of taking the matter to court, it decided to compensate and conceal its losses. “It is not that often that the head of the Securities Bureau personally holds such talks, and our firm wanted to meet his expectations,” he added.
Miki explained that he later visited Matsuno to report on how the loss problem was settled, to which the bureaucrat thanked him for his trouble and added that the off-the-book loss figure was not too big for Yamaichi to handle.
“One rally in the stock market will solve everything,” Miki quoted Matsuno as saying at the end of their discussions.
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