The failed Ishikawa Bank extended a 5.7 billion yen loan in 2000 for a golf course assessed by the borrower as being worth 6.3 billion yen but by banking regulators as worth 100 million yen, sources said Monday.
On Sunday, police arrested Shigeru Takagi, 67, former president of Ishikawa Bank; Mutsumi Kawaguchi, 63, former senior managing director; and Michihiko Fujita, 42, former head of the bank's Tokyo office; on suspicion of breach of trust.
Police turned their cases over to prosecutors Monday, alleging the bank officers extended the loan to Tokyo ad agency National Enterprise for the golf course even though it did not have sufficient collateral.
Police plan to question Takagi and the others as well as executives at National Enterprise, including its chairman, Tomokazu Mishima, 66.
The second-tier regional bank based in Kanazawa went under in December 2001.
The sources said the bank decided to extend the loan based on the 6.3 billion yen assessment made by the National Enterprise-affiliated golf course operator, Country Club The First, in Kisarazu, Chiba Prefecture.
However, about a year after the bank provided the loan, the Financial Services Agency appraised the Chiba golf course at only 100 million yen, according to the sources.
National Enterprise, with earlier financing from Ishikawa Bank and other lenders, had the 18-hole golf course and clubhouse built on a 94-hectare site in March 1997, but the company was unable to pay all of the construction costs and needed to borrow more.
As of September 2000, when the alleged questionable loan was extended by Ishikawa Bank, the golf course had little collateral value.
The contractor, together with Ishikawa Bank and nonbank financial institutions, had already placed a mortgage exceeding 20 billion yen on the course and clubhouse.
In FSA inspections conducted in December 2001, the agency categorized loans made using the golf course as collateral as loans to a bankrupt company.