Prosecutors have invoked an antifraud provision in the 2000 civil rehabilitation law for the first time to arrest the former president of a failed hotel and entertainment facility operator on suspicion of misappropriating corporate funds while the company was under court-protected rehabilitation.
The Nagoya District Public Prosecutor's Office identified the suspect as Hiroshi Miyasaka, 50, former president of Holidaytower, a failed company based in Toyohashi, Aichi Prefecture.
Prosecutors also arrested Shogo Fukuoka, 50, a chartered accountant and real estate broker, as an accomplice.
Holidaytower, which operates Hotel Nikko Toyohashi and ice-skating rinks and bowling centers in the Toyohashi area, sought court protection against creditors in May 2002. The firm had about 43.4 billion yen in liabilities.
Miyasaka and Fukuoka are suspected of transferring 61 million yen from the bank accounts of Holidaytower and its affiliate companies to their personal bank accounts between March and June 2002, prosecution sources said.
Both Miyasaka and Fukuoka have denied the allegations, maintaining the money was a legitimate fee for consulting services, they said.
Investigators suspect Fukuoka, a friend of Miyasaka, masterminded the scheme. Fukuoka and Miyasaka live in Tokyo.
Prosecutors said Miyasaka is the first business executive arrested for violating the civil rehabilitation law, which provides fast-track rehabilitation for insolvent companies and sets criminal liabilities on executives who knowingly harm creditors' interests.
Miyasaka and Fukuoka have refused to return the money, according to Holidaytower's court-appointed administrator. The two reportedly claimed the money was spent for hotel upkeep and consulting fees.
The Tokyo District Court, which is supervising the rehabilitation of Holidaytower, once halted the rehabilitation process after Miyasaka was found to have violated asset management provisions.
The company is now under rehabilitation through the government-backed Deposit Insurance Corp., which took over the company after the court forced Miyasaka out of office.