The failed department store chain Sogo Co. filed a lawsuit Wednesday against three of its former executives for damages, citing fictitious deals with a subsidiary prior to the firm’s collapse in June.

Current Sogo management filed the suit with the Tokyo District Court against former Chairman Hiroo Mizushima, 88, former Vice Chairman Moriichi Inoue, 87, and former Vice President Yukio Nakazawa, 74, demanding the three repay the firm some 2.69 billion yen.

The plaintiff said the three former executives are responsible for the money that has not been paid back by Cho-ompa, a subsidiary of Sogo.

The plaintiff said Sogo loaned 400 million yen to 500 million yen monthly to the water-treatment plant builder in fictitious transactions from 1994, and more than 5 billion yen has not been repaid.

Lawyers for Sogo said they believe the three defendants are responsible for 2.69 billion yen out of the 5 billion yen.

Sogo and Cho-ompa signed contracts in 1984 and 1991 that obliged the latter to obtain all necessary materials from Sogo, the plaintiff said.

But Cho-ompa prepared fictitious invoices, using the names of client contractors, to have Sogo issue promissory notes for these invoices, the plaintiff said.

Cho-ompa then cashed the notes to finance its day-to-day operations, they said.

The affiliate was repaying Sogo, with interest, five months after the promissory notes were issued, but since the plant builder was making hardly any profits, its repayments to Sogo were effectively financed by new money borrowed from Sogo by issuing new invoices.

The plaintiff will file a similar suit early next month against the three defendants to seek redress for what they call sloppy investment decisions they made to expand the retailer’s domestic and overseas operations, they said.

They said an aborted expansion plan into Turkey in the early 1990s caused Sogo about $60 million in losses.

Sogo was at the peak of its overseas expansion in the early 1990s, building on domestic growth. The number of outlets increased to 30 in 1991 from 20 in 1987.

It began eyeing more overseas markets, including Turkey, Australia and Spain, and initiated talks with local firms to obtain properties.

But the slumping Japanese economy in the 1990s forced it to end its expansion, and many projects failed.

The land intended for the Sydney outlet is now being rented by a local firm, and Spanish tenants are using a store building in Barcelona, they said.

Current Sogo management does not know how the money was invested in Turkey.

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