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Tokyo police arrested former Incubator Bank of Japan Chairman Takeshi Kimura, current President Tatsuya Nishino and three others Wednesday on suspicion of obstructing a Financial Services Agency audit of the bank last year, police sources said.

Kimura, 48, has denied hindering the probe in violation of the Banking Act, while the 54-year-old Nishino and others admitted to it, the Metropolitan Police Department said.

A former Bank of Japan official and ex-adviser to the FSA, Kimura was involved when Incubator Bank was set up in 2004 and became its chairman in January 2005. He stepped down in May after the bank reported a ¥5.1 billion net loss in the year that ended in March.

The three others arrested were senior executive Hiroyuki Yamaguchi, 48, executive Katsuya Watanabe, 43, and former executive Nobuhiro Sekimoto, 38.

Kimura, who made his name as a key adviser for Heizo Takenaka when he was financial services minister in the government of Prime Minister Junichiro Koizumi, is believed to have told other executives to systematically delete e-mails around the time of the audit, the sources said.

Later the same day, the bank dismissed Nishino and appointed Go Egami, a writer and outside board member, as his replacement.

Egami, whose real name is Haruki Kohata, worked for years at Dai-ichi Kangyo Bank, one of the three founder banks of Mizuho Financial Group Inc. As a public relations officer, he dealt with a series of problems at DKB, including the revelation in 1997 of illegal loans extended to a “sokaiya” corporate extortionist.

The police are aiming to uncover the entire picture of dubious business dealings involving the Tokyo-based bank, which specializes in loans to small and midsize companies. They believe shady transactions among the bank’s borrowers within a network of more than 100 firms set up by Kimura also occurred.

The five executives are suspected of deleting about 280 e-mails from the bank’s computer servers in a bid to block the financial industry watchdog from learning its business and financial situations in an audit from June last year to this March, and offering false accounts to FSA inspectors on the lack of those e-mails.

Kimura allegedly instructed other executives during a conference to delete the e-mails, the police said.

The e-mails reportedly contained details of the bank’s loan claims transactions with collapsed moneylender SFCG Co., in which it allegedly charged illegally high interest rates, as well as those concerning deals among borrowers.

Earlier reports alleged SFCG disposed of in-house documents indicating the involvement of its former president, Kenshin Oshima, 62, in hiding company assets from creditors by transferring them to an affiliated entity before the lender failed in February 2009. Oshima and three others were arrested last month for allegedly transferring ¥41.8 billion against the interests of creditors, but investigators suspect more than ¥260 billion was involved.

Oshima founded SFCG’s predecessor, Shohkoh Fund Co., in 1978.

The financial industry watchdog ordered Incubator Bank on May 27 to suspend some operations from June 7 through Sept. 30 due to its obstruction of the audit and a “serious violation of the law” regarding its dealings with SFCG, which went under in February last year.

On June 11, police raided the bank’s main office and other related locations, including the office of Kimura’s current Tokyo-based business, on a charge of violating the Banking Act.

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