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Nikko Cordial Corp. sued three former top executives Monday, demanding 3.36 billion yen in damages for their alleged involvement in accounting fraud, Japan’s third-largest brokerage said.

The three are Junichi Arimura, former Nikko Cordial president; Hirofumi Hirano, former chairman of Nikko Principal Investments Japan Ltd.; and Hajime Yamamoto, former executive managing director of Nikko Cordial Securities Inc.

The suit was filed with the Tokyo District Court in light of recommendations made by the brokerage’s in-house panel, which was tasked with finding out who was responsible for the fraud.

In mid-December, the brokerage corrected its group financial statements for 2004 and 2005, citing the accounting fraud. The announcement led the Tokyo Stock Exchange to transfer Nikko Cordial stock to the supervisory post for possible delisting.

In a news release Monday, Nikko Cordial said it falsified the statements by illegally booking evaluation gains on the exchangeable bonds of subsidiary NPI Holdings Inc. issued to Nikko Principal Investments Japan Ltd. To falsify the statements, Nikko Cordial used fraudulent techniques, such as publicizing false issuing dates for the bonds, the company said.

On Feb. 27, the brokerage gave the Finance Ministry a corrected version of the statements certified by PricewaterhouseCoopers Aarata.

When the fraud became public late last year, the Financial Services Agency fined the brokerage a record 500 million yen. On March 12, however, the TSE decided not to delist the brokerage, saying it could not find evidence the brokerage engaged in fraud systematically — although that was what the brokerage’s special in-house panel had concluded.

The scandal sparked an exodus of customers to rival brokerages.

In the news release, Nikko Cordial said it is demanding damages from Hirano because he was responsible for the company’s decision to publicize the bogus bond issuance dates.

It said it is demanding damages from Yamamoto because he was responsible for the decision to falsify the original financial statements and submit them to the government.

As for Arimura, Nikko Cordial claims that he ignored his professional duty to supervise Hirano and Yamamoto to ensure the two refrained from falsifying the statements, it said. Arimura and the other two quit over the scandal.

In perpetrating these deceptive actions, all three former top executives “neglected their professional duties” to ensure the company complied with relevant laws, according to the release.

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