Takugin chiefs cleared in breach of trust case

SAPPORO – Two former presidents of the failed Hokkaido Takushoku Bank were acquitted Thursday in a breach of trust case involving 8.57 billion yen in allegedly shady loans that the bank lent to a local business group.

The Sapporo District Court also acquitted a former president of the Hokkaido-based Therme group, who had been charged with conspiring with the former presidents of the bank, popularly known as Takugin, for about 4.7 billion yen of the loans.

Prosecutors had demanded five-year prison terms for former Takugin Presidents Hiroshi Yamauchi, 75, and Sadamasa Kawatani, 68, for aggravated breach of trust in providing the loans that turned sour, and a three-year term for Therme’s Yoichi Nakamura, 62.

Yamauchi, Kawatani and Nakamura had all pleaded not guilty.

The former Takugin presidents said they undertook the actions for the benefit of the Sapporo-based bank and that their decisions were justifiable under the circumstances at the time. Nakamura also said he intended to repay them.

Presiding Judge Katsumasa Koike said there is a “reasonable doubt” about whether Yamauchi gave the go-ahead for the loans “for self-protection,” as charged by prosecutors, although the judge determined that the Takugin chiefs failed to carry out their duties faithfully.

Prosecutors have said Kawatani admitted that point during initial interrogations. But the judge said the alleged testimony is untrustworthy “because the core portion of the testimony is extremely vague,” adding that he may have been “guided” to make the statement by investigating prosecutors.

The judge also ruled that the prosecutor’s records based on the interrogation of a former Takugin executive could not be used as evidence, noting that the possibility of the executive having been influenced by prosecutors “cannot be ruled out.”

Both Yamauchi and Kawatani were teary-eyed when they heard the not-guilty sentence. Yamauchi bowed toward the judge while Kawatani nodded slightly.

During earlier court proceedings, the former bankers insisted that their interrogation records were written “100 percent” by the prosecutors, and gave accounts of how they were verbally abused during the interrogations.

“I would like to express respect for the decision of the court, which humbly listened to the arguments of the defense,” said a lawyer representing Yamauchi. “Instead of expressing joy over the acquittal, my client said he is aware of the grave moral responsibility (for his actions).”

Meanwhile, prosecutors indicated they would appeal.

“We are surprised at the court’s decision,” said Akira Nakamura, deputy chief prosecutor at the Sapporo District Public Prosecutor’s Office. “We will examine the ruling and consult with higher authorities on how to respond.”

Takugin collapsed in November 1997 under 1.17 trillion yen in debts. The court has ordered its former executives, including Yamauchi and Kawatani, to pay damages over illicit loans in three suits, but the executives have appealed in all the cases.

Prosecutors have charged that Yamaguchi and Kawatani caused losses to Takugin by lending 8.57 billion yen to the Therme group, which was engaged in a Sapporo resort development and other projects, between April 1994 and October 1997.

Judge Koike determined that the bankers recklessly kept lending to the Therme group without sufficient collateral, even though they knew the group lacked repayment capacity after the burst of Japan’s asset-inflated economic bubble in the early 1990s.

However, the judge also acknowledged that cutting off loans to the group and letting it go bankrupt posed the risk of serious damage to Takugin’s financial health, dismissing the prosecutors’ argument that the bankers kept the dubious lending to evade their personal management responsibility.

The project later collapsed after a local affiliate of Yaohan Japan Corp., a failed supermarket chain, withdrew.

The three involved were arrested in March 1999 based on information obtained during the bank’s internal probe over excessive loans unleashed during the bubble period.

Yamauchi assumed the bank’s presidency in 1989 and Kawatani in 1994.

Takugin was the first of several major Japanese banks to go bust in the late 1990s under the heavy weight of nonperforming loans.

The bank had announced a merger plan with Hokkaido Bank, a Sapporo-based regional bank, when its operational difficulties came to light in April 1997 but broke off the plans due to conflicts over the handling of the massive amount of its bad loans.

It ended its 97-year history when the government intervened in November 1997. Takugin’s operations were then taken over by North Pacific Bank, a Sapporo-based regional bank, and Chuo Trust & Banking Co., which is now Chuo Mitsui Trust & Banking Co.

As for other irrecoverable Takugin loans, Resolution and Collection Corp., the state-run debt collector that took over the bank’s problem loans, has filed five damages suits and won lower court orders in three of them for damages totaling 6.3 billion yen.