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The Tokyo District Court on Thursday sentenced a former vice president of Yakult Honsha Co. to seven years in prison and fined him 60 million yen for engaging in illicit transactions of “Princeton bonds” over the past decade.

Naoki Kumagai, 72, was convicted of aggravated breach of trust, fraud and other charges.

Kumagai, a former official of the National Tax Agency before joining Yakult in 1979, pleaded guilty at his first trial session to tax evasion involving the bond transactions, but he pleaded not guilty to aggravated breach of trust, fraud and other charges.

In the same trial, Yakult, which makes lactic drinks and cosmetics, was fined 10 million yen for corporate culpability for falsifying its April-September 1997 earnings report — a violation of the Securities and Exchange Law.

Prosecutors had demanded an eight-year prison term and 70 million yen fine for Kumagai and a 10 million yen fine for the company.

Presiding Judge Kohei Ikeda said Kumagai tarnished the later part of his life due to his greed. The judge also rapped Yakult for failing to check Kumagai’s wrongdoings.

According to the court, Kumagai damaged Yakult’s financial standing by having it purchase bonds from Princeton Economics International Ltd. of the U.S. via the Tokyo branch of the securities firm Cresvale International Ltd.

By purchasing the bonds, he received a 530 million yen rebate from Cresvale’s Tokyo chairman, Akira Setogawa, between 1995 and 1997, the court said.

The rebate was deducted from Yakult’s investment for the bonds, which constituted the aggravated breach of trust.

The same court is expected to rule in Setogawa’s trial on Oct. 10.

Kumagai also embezzled 700 million yen from Yakult’s Hong Kong-based affiliate between 1991 and 1998 and overstated the company’s income in its April-September 1997 interim earning reports, the court said.

Kumagai had endangered the firm’s assets by carrying on highly speculative stock index transactions while evading 245 million yen in income tax for three years from 1995, according to the court.

According to his lawyer, Kumagai plans to appeal the ruling.

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