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The stock bought by a former vice president of Yakult Honsha Co. with rebates from the Tokyo branch of Cresvale International Ltd. was not transferred under his name because the branch chairman did not want authorities to discover his activities, sources close to the case said Wednesday.

According to the sources, investigators believe branch chairman Akira Setogawa orchestrated the rebates and stock record manipulation in an effort to help the former executive evade income tax.

Setogawa himself is believed to have received some 500 million yen as a secret bonus and is under investigation for tax evasion. The money was deposited in a Hong Kong bank account, according to sources.

Cresvale, a securities subsidiary of Princeton Economics International Ltd. of the United States, is embroiled in a fraud scandal in which so-called Princeton bonds issued by PEI were sold to dozens of Japanese firms under illegal circumstances.

Many of the companies have suffered huge losses on the bonds, which were sold under the impression that the product was authorized by the Finance Ministry and Bank of Japan, when in fact they were not.

Financial regulators also believe Cresvale violated the Securities and Exchange Law by offering rebates to company executives who agreed to purchase the bonds.

The Securities and Exchange Surveillance Commission has said that Cresvale’s Tokyo branch doled out some 620 million yen in such rebates to executives of five Japanese firms between September 1994 to June 1998.

As for the former Yakult executive, roughly 225 million yen of about 530 million yen in rebates received from Cresvale’s Tokyo branch was used to purchase bonds issued by a waste disposal company with a warrant to receive new stock in October 1996.

In 1997, Setogawa bought 10,000 of the 75,000 shares received through the warrant from the former Yakult executive for 10 million yen, sources said, adding that the money paid was part of the secret bonus he received from Cresvale.

However, the holder of all the shares involved in the deal continued to be registered as Cresvale Far East — the security firm’s Hong Kong branch — and the former executive never even received a receipt confirming the stocks were his, the sources said.

In addition, the sources said that Setogawa, fearing his secret bonus and Cresvale’s rebate payments would be discovered by tracing such documents, opted to leave the name of registered owner of the stocks unchanged.

Taxation officials have already gone through the former Yakult executive’s income records through the six years up to 1998, but no evidence of the stock purchase has turned up, the sources said.

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