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Three former top executives of the failed Long-Term Credit Bank of Japan pleaded not guilty Friday before the Tokyo District Court to hiding 313 billion yen in losses in the bank’s financial report for fiscal 1997.

Former President Katsunobu Onogi, 63, and former Vice Presidents Yoshiharu Suzuki, 62, and Masami Suda, 59, also stand accused of illegally paying dividends to shareholders even though the bank’s financial condition did not warrant such a payout.

The amount of losses hidden is the highest in Japan’s history of corporate crime, topping the 275 billion yen in the window-dressing case involving the now-defunct Yamaichi Securities Co.

“It is true that (LTCB) submitted the financial report and paid dividends to shareholders as mentioned by the prosecutors,” Onogi said. “But I did not believe it constituted a crime at the time.”

He offered an apology to taxpayers for the huge burden imposed on them when the government injected public money into the bank.

LTCB was placed under temporary state control in October 1998 to help it recover from its bad loans, and the government in September announced its plan to sell the bank to an investor group led by U.S investment firm Ripplewood Holdings LLC.

The former executives’ defense team said every bank leader faces a difficult decision when determining what amount of bad loans should be regarded as losses.

The defendants decided to report 615 billion yen in bad loans, but prosecutors argued that they should have reported about 1 trillion yen as irrecoverable and called it a crime that they failed to do so, the lawyers said.

Prosecutors said the bank’s top executives, including the three defendants, realized that about 800 billion yen in bad loans had to be written off as losses when they discussed the policy for settling the fiscal 1997 accounts in November 1997.

But fearing that disclosing such huge losses would seriously damage the bank’s credibility, they ignored the Finance Ministry’s standards and used the bank’s looser guidelines to assess the soured loans, they said.

In that method, Suzuki, who was in charge of disposing of bad loans, and Suda, in charge of risk management, lowered the amount of loan-loss reserves necessary to write off irrecoverable loans to affiliated companies by 313 billion yen, with Onogi’s approval, prosecutors said.

Such falsification of earnings reports is against the Securities and Exchange Law, they noted.

LTCB instead falsely declared that the bank made 46 billion yen in profits, of which 7.18 billion yen was paid to shareholders. Illegal dividend payments constitute a violation of the Commercial Code.

The three defendants were freed on bail in July.

In October 1998, the government declared the bank insolvent due to its huge burden of nonperforming loans and placed it under state control.

The bank was the first to be nationalized under the newly enacted law on emergency measures to revitalize the financial system, which enables the government to put failed and failing banks under state control.

In December, Nippon Credit Bank — another long-term credit bank — was placed under temporary state control due to bad loans, becoming the second nationalized bank.

After about a year of lengthy negotiations, the Financial Reconstruction Commission announced in September its selection of the Ripplewood-led investor group as the primary candidate to buy LTCB.

Once the takeover by Ripplewood is completed, LTCB would be the first major Japanese commercial bank to be acquired by a foreign firm.

LTCB, set up in 1952, played a key role in rehabilitating Japanese industry in the postwar period by extending long-term loans to corporations.

Onogi, who assumed the presidency in April 1995, resigned in September 1998 to take responsibility for the bank’s dismissal business performance.

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