The Tokyo District Court on Thursday rejected a demand from the Resolution and Collection Corp. that four former executives of the Long-Term Credit Bank of Japan pay the state damages for "illicit decisions" to extend loans in 1990 to the now-defunct real-estate developer EIE International Corp.
"There is no evidence to prove they made errors that were tantamount to overstepping the boundaries of their jurisdiction in making a decision to extend bank loans," presiding Judge Atsuo Nagano said. "The loan decisions were logical in view of the specific conditions in those days, as the managers came to the conclusion that the bank would not face difficulties in recovering the loans in light of its position as the main bank (for EIE International) and in view of the fact that the loans would be short-term."
The ruling marks the government-backed debt-collection entity's first defeat in a lawsuit in which it asked the managers of an insolvent financial institution to take responsibility for lending decisions that led to its own failure.