The Tokyo High Court, in a retrial ordered by the Supreme Court, acquitted on Tuesday three former executives of the defunct Nippon Credit Bank of window-dressing the accounting books.
The NCB’s former chairman, Hiroshi Kubota, 80, ex-President Shigeoki Togo, 67, and former Vice President Tadao Iwaki, 73, were given suspended prison terms in 2004 that were upheld in 2007. The three were convicted of submitting undervalued bad loans and false financial statements for the year to March 1998.
The focus of the case was whether it was legal for them to use old guidelines in assessing nonperforming loans, instead of the Finance Ministry’s new guidelines introduced shortly before the bank gave the statements.
In 2004, the Tokyo District Court found the three guilty of failing to adhere to the new guidelines and for conspiring to conceal ¥159.2 billion in bad loans. The Tokyo High Court later upheld the verdict, sentencing Kubota to 16 months in prison and the other two to a year in prison, all suspended for three years.
But in 2009, the Supreme Court ruled that it was ambiguous at the time whether the new guidelines were to be strictly applied and that there was “room for interpretation.”
The top court determined the assessment using the old guidelines was acceptable and sent the case back to the lower court for retrial.
Tuesday’s ruling is in line with a similar case involving the Long-Term Credit Bank of Japan, in which the Supreme Court reversed guilty verdicts in 2008.
NCB was nationalized in 1998 under the weight of massive bad loans and became Aozora Bank in 2001 when the government completed its sale to the private sector. A total of ¥4.9 trillion in public funds was injected into NCB.