Senior officials at Cresvale International Ltd., which is at the center of a massive fraud investigation, offered rebates amounting to 500 million yen to a former vice president of drink maker Yakult Honsha Co. for the purchase of privately placed bonds it sold, it was learned Thursday.

The bonds, which were issued by Princeton Economics International Ltd. of the United States via a paper company, were sold in huge quantities to Japanese companies by Cresvale, a brokerage subsidiary of PEI. The bonds are now considered irredeemable.

According to the sources, Akira Setogawa, head of Cresvale’s Tokyo branch, acknowledged the rebates had been extended to Yakult during recent questioning by the Securities and Exchange Surveillance Commission, the sources said.

Officials at other firms are believed to have received similar rebates and regulators are continuing to look into the matter, the sources said.

In some cases, the rebates offered to company officials ran into hundreds of millions of yen, according to the sources.

Yakult was one of the top purchasers of the Princeton bonds, the sources said, with the firm buying about 5.3 billion yen worth in September 1994, 4.1 billion yen worth in April 1995, 10 billion yen the following month and 17.2 billion yen in June 1996.

A fully owned Yakult subsidiary also purchased 300 million yen worth in June 1992 and about 2.1 billion yen worth in November the same year, they added.

However, the former Yakult executive in question has denied receiving any form of rebate from Cresvale. He resigned in March last year to take responsibility for massive losses the firm had incurred through its investments.

Cresvale employees have reportedly submitted documents to investigators to back their claims regarding the rebates. The case is being investigated as a possible violation of the Securities and Exchange Law, which bans sales with promises of special privileges.

Cresvale is suspected of having sold the bonds to Japanese firms starting in October 1998 with documents falsely claiming the financial products had been authorized by the Finance Ministry and the Bank of Japan.

The Financial Supervision Agency on Monday ordered Cresvale’s Japan unit to suspend operations for three weeks.

Cresvale also allegedly promised to compensate for any losses incurred by investment in the Princeton bonds.

Some 113.8 billion yen worth of Princeton notes sold to 76 Japanese companies are now believed irredeemable and some firms estimate major losses as a result of these investments.

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