The Tokyo District Court has ordered Seibu Railway Co. to pay ¥23.74 billion in compensation to 16 institutional investors for investment losses stemming from its falsified financial reports.
It is the most damages awarded so far in a series of suits against the Seibu Railway group over the falsified corporate data.
The compensation also exceeded the damages that Livedoor Holdings Co. was ordered to pay last June, ¥9.54 billion, to companies that suffered hefty losses as a result of accounting fraud.
The defendants in Tuesday’s Seibu ruling were Seibu Railway, group firm Prince Hotels Inc. and Yoshiaki Tsutsumi, at the time the de facto owner of the Seibu Railway group.
Among the plaintiffs, who were seeking ¥24.87 billion, was the Pension Fund Association, a Tokyo-based umbrella body for about 1,400 corporate pension funds.
Presiding Judge Yutaka Watahiki ruled that the defendants systematically neglected to perform their duty to correctly state key data in Seibu Railway’s annual financial reports, and they caused losses among shareholders when the stock plummeted after the transgressions came to light.
The transgressions were revealed in October 2004, when Tsutsumi, former chairman of both Seibu Railway and Kokudo Corp., announced that Seibu Railway had falsified mandatory financial statements by underreporting Kokudo’s stake in the group. Kokudo was a privately held firm that effectively controlled the Seibu Railway group at the time.
Seibu Railway was delisted two months later.
The falsification was designed to enable the railway to circumvent a Tokyo Stock Exchange rule that a firm must be delisted if the combined stake of its top 10 shareholders exceeds 80 percent for more than one year.
The Tokyo District Court ordered Kokudo in September 2007 to pay ¥680 million in damages to All Nippon Airways Co, and awarded a total of about ¥230 million to 176 individual investors last April.
Tsutsumi in October 2005 received a suspended 30-month prison term. He did not appeal.
The Seibu group is now led by Seibu Holdings Inc., established in February 2006. It is not listed on the stock exchange.
In a separate ruling Tuesday, the Tokyo High Court ordered Seibu to pay around ¥950 million to four trust banks over the financial falsification, overturning a lower court decision that rejected the plaintiffs’ claims. The trust banks had demanded around ¥12 billion.
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