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The former chairman of Cresvale International Ltd.’s Tokyo branch pleaded not guilty Monday to charges that he violated the Securities and Exchange Law by selling so-called Princeton bonds to clients while knowing they would be irredeemable.

Appearing before the Tokyo District Court, Akira Setogawa, 66, also denied two other charges, including conspiring with a former vice president of Yakult Honsha Co. to falsify Yakult’s earnings report, and damaging Yakult’s financial assets by offering rebates to the Yakult executive by using part of the firm’s investment in the bonds.

Setogawa did admit to evading 260 million yen in taxes between 1996 and 1998. Prosecutors alleged that he did this by concealing commissions he received from Princeton Economics International Ltd., which is Cresvale’s U.S. parent and the issuer of the bonds.

According to the indictment, Setogawa sold 1.52 billion yen worth of what Cresvale called Princeton notes to eight Japanese companies and two individuals from March 1998 to May 1999, with assurances that the bonds were safe investments.

While prosecutors said Setogawa violated the Securities and Exchange Law because he knew it was highly unlikely the bonds could be redeemed, he maintained he was not aware they would be irredeemable.

Prosecutors also claimed Setogawa committed aggravated breach of trust under the Commercial Code when he damaged Yakult’s assets by financing payoffs to the firm’s then vice president, Naoki Kumagai, by using part of Yakult’s investment in the bonds. Setogawa denied the charge, claiming he used the U.S. parent firm’s own money to offer the rebates.

He also denied that he conspired with Kumagai to falsify Yakult’s interim earnings report in 1997 to conceal the firm’s losses over investment in the bonds.

Cresvale’s Tokyo Branch sold a total of 413.5 billion yen worth of Princeton bonds to 90 companies by the time the firm’s operations were suspended by the Financial Supervisory Agency last September. The firm defaulted on 115.1 billion yen worth of the bonds, causing huge losses to its customers.

Yakult, a Tokyo-based lactic drink maker, had purchased 40.6 billion yen worth of Princeton bonds by 1998.

Two other executives of Cresvale’s Tokyo branch have been indicted for violating the securities law for allegedly selling the bonds by presenting documents falsely stating such sales were licensed by the government.

Kumagai pleaded not guilty to the charges against him in the same court last month.