Ex-Finance Ministry Official Denies Role In Yamaichi Loss

A former head of the securities bureau at Japans finance ministry yesterday denied that he orchestrated concealment of off-balance sheet losses at failed brokerage Yamaichi Securities.

The off-the-book debts, worth about 260 billion yen ($2 billion), ultimately helped topple Yamaichi, a former Big Four securities house, last November.

I gave various options (to Yamaichi), but I never thought that it would make any off-the-book deals that violated laws, said Nobuhiko Matsuno. I dont think it was irresponsible for us to indicate to management at the Big Four what their options were, he said. Final decisions would have to be made by management itself. Matsuno made the remarks to the Lower House of parliaments Budget Committee, which had called him as a witness.

 

He was recently questioned by prosecutors on suspicion of having given advice to Yamaichi on how to conceal off-book securities deals, Japanese media reported.

Three former Yamaichi executives were arrested this month on suspicion of window-dressing financial reports to hide huge off-the-book losses, in violation of the securities law.

Matsuno told the committee he met with a former Yamaichi executive, Atsuo Miki, over tobashi deals in late January 1992, correcting his previous remarks that Miki had consulted him before 1992 about tobashi.

Tobashi deals involve shifting loss-making portfolios from client to client while promising to cover paper losses. After a widespread securities industry loss compensation scandal in 1991, the Securities and Exchange Law was revised to ban both giving and receiving of compensation for losses, taking effect on January 1, 1992.

Matsuno said he had told Miki at the meeting that covering losses from tobashi deals would be illegal, violating the revised securities law. But he also told Miki that if Yamaichi made a tobashi-type repurchase deal with an overseas investor it would not be illegal, he said.

He said he told Yamaichi if it wanted to solve a problem it was having with one of its customers, it should take the case to court. He told the committee he had not heard any specific details about a particular case.

He said there was a similar tobashi case at another Big Four broker, Daiwa Securities Co Ltd. After consulting the MOF in 1991, Daiwa decided to take the case to court, he said.

In 1992, Daiwa said it had agreed to pay penalties to a customer to settle a suit over a tobashi deal covered by repurchases agreements which were not honoured.

Meanwhile, Matsuno said he stopped having meals and drinks with officials at securities houses after revelations of dubious loss compensation deals in June 1991.

I cant deny that I had meals and drinks with officials from securities houses before the (loss compensation) scandal broke... I will do some serious soul-searching over criticism that we should have been more proper in our administrative approach, he said.

The daily Mainichi Shimbun reported on Wednesday that Matsuno had begun accepting entertainment worth over one million yen from banks and brokerages after he became director-general of the ministrys Banking Bureau in 1984 and this continued until he left the ministry in 1992.

Yamaichi was among the securities houses which wined and dined Matsuno, the Mainichi said.