Wacoal Corp. has asked Kokudo Corp. to annul a contract under which it bought some of Kokudo’s shares in Seibu Railway Co. before the railway company announced that its financial statements were incorrect, Wacoal officials said Thursday.

Wacoal has also demanded that Kokudo, the largest shareholder in Seibu Railway, repay the money it spent on the Seibu shares because it believes Kokudo breached its trust, the officials said.

Kokudo and Seibu Railway are suspected of having falsified information in their financial statements by under-reporting Kokudo’s shareholdings in the railway operator.

At least 20 companies, including the leading underwear maker, bought Seibu shares at the request of Kokudo before the announcement of the under-reporting on Oct. 13, the companies’ officials said.

Other buyers included Matsushita Electric Industrial Co. and Dentsu Inc.

The Securities and Exchange Surveillance Commission began an investigation into Kokudo on Wednesday on suspicion of insider trading. It suspects Kokudo of selling some of its Seibu shares without telling buyers that the railway firm’s stock ownership conditions might have met Tokyo Stock Exchange delisting standards.

Kokudo, an unlisted firm running the Prince Hotels chain and sports facilities, only told some of the buyers that the sales were to increase the railway firm’s management transparency, sources have said.

According to Wacoal, a proposal was made from the Kokudo side on Sept. 6 that Wacoal and the Kokudo group cross-hold shares. Wacoal bought 2.5 million Seibu shares for 2.8 billion yen on Sept. 29.

On Saturday, three days after the underreporting disclosure, Wacoal told Kokudo that it wanted to annul the sales contract and have its money refunded because it had not been informed of the possibility that Seibu stocks could be delisted from the TSE.

A Wacoal official said the situation surrounding its purchase of the Seibu stocks was “truly regrettable.”

A Kokudo official declined to comment on the Seibu stock sales to Wacoal.

Kokudo’s failure to explain the equity ownership conditions could turn out to be a violation of the Securities and Exchange Law on insider trading.

Among other buyers, Matsushita purchased 2 million Seibu shares for 2.2 billion yen in late September after former Kokudo Chairman Yoshiaki Tsutsumi asked the company to buy the stocks earlier that month, according to Matsushita officials.

Odakyu Electric Railway Co., which has been cooperating with Seibu Railway on tourism business in the Hakone area since late last year, bought 2.6 million Seibu shares for 3 billion yen on Sept. 27 after Tsutsumi directly asked Odakyu Chairman Kunio Toshimitsu to buy the shares, according to Odakyu officials.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.