SHIZUOKA — The ex-president of defunct supermarket chain Yaohan Japan Corp. was arrested by police Monday along with two other executives on suspicion balance sheets were falsified to pay shareholders illegal dividends.

The trio is suspected in organizing the window-dressing of Yaohan Japan’s financial statements so that about 13 billion yen in profits would show on the books for the period from April 1993 to March 1996, according to police.

The three being held are Terumasa Wada, 67, former head of the main Yaohan group company, Akihiko Tsukamoto, a former finance division manager, and Kyoichi Okada, 49, who headed an insolvent financial subsidiary.

Police accuse the Shizuoka-based firm of violating the Commercial Code by transferring losses to overseas affiliates, including in China and Singapore. By keeping the losses off Yaohan’s balance sheets, police say the trio enabled the firm to pay shareholders about 890 million yen in illegal dividends for March 1996.

Informed sources say the window-dressing began in 1986 near the time Yaohan listed itself on the first section of the Tokyo Stock Exchange as part of efforts to build creditworthiness and firm up its stock price.

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