KANAZAWA, Ishikawa Pref. – Shareholders of the failed Ishikawa Bank filed a damages suit Tuesday with the Kanazawa District Court, demanding the bank and its management pay 880 million yen in compensation for misleading them into buying shares when the bank was on the verge of going under.
According to the suit, Ishikawa Bank had a capital deficit of about 4 billion yen as of March 2001 and had effectively gone bankrupt, but management decided at a board meeting to increase its capital.
The heads of the second-tier regional bank’s branches and bank officials told the plaintiffs they should use their savings to purchase bank shares so they could receive loans and because the shares had a higher yield than savings accounts, the suit said.
Seventy shareholders, from Ishikawa, Fukui, Toyama and six other prefectures, who took the bank’s advice claim it was illegal for the bank to seek a capital increase while hiding its dire financial condition.
When the bank, based in Kanazawa, went under in December, the shares lost their value and the plaintiffs suffered a heavy financial blow.
“Ishikawa Bank took the depositors from where there were no risk to a place with risks. If they didn’t invest, the total amount of their savings would have been protected,” said Masahiko Kawakami, a lawyer for the plaintiffs.
Two other groups of shareholders plan to join the suit, and ultimately, about 200 shareholders are expected to seek more than 2 billion yen from the bank and its management, according to sources close to the case.
Ishikawa Bank filed for insolvency proceedings with the Financial Services Agency in December, having a negative net worth of 22.8 billion yen as of September.
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