More Names Disclosed In Japan Broker Scandal

New York Times/August 1, 1991
By James Sterngold

Tokyo -- In a new round of disclosures today of the extent of the discriminatory practices in the Japanese stock market, 13 brokerage houses said they improperly covered more than $300 million in losses for some of the country's largest industrial groups and a politically powerful religious organization. On Monday, Japan's four largest securities houses released a list of clients to whom they had paid nearly $1 billion in improper compensation for market losses. Those payments have created a scandal that has appeared to substantiate longstanding criticisms that the market here favors powerful interests and discriminates against individuals and foreigners.

Intended to Quell Outrage

The disclosure of the two lists resulted from heavy pressure by the ruling Liberal Democratic Party, whose image has suffered because of the scandal The releases have been intended to quell public outrage, but they have left numerous questions unanswered. The disclosures cover only those Improper payments made up to March 31, 1990. The stock market's crash lasted for most of the remainder of the year, thus there were presumably more payments. Despite the resignations of the heads of two large brokerage houses, none of the individuals involved have been identified or punished. The new list, like the first, included members of most of Japan's most powerful corporate groups, including Mitsubishi, Mitsui, Sumitomo, Matsushita, Toshiba and Hitachi. Also receiving the improper payments were the Seibu Department Store, Nippon Steel and public pension funds. In all, 380 companies and 6 individuals - identified only by their initials or as corporate directors - were on the list. Altogether, those un the new list were paid a total of about $315 million at current exchange rates.

Banks and Buddhist Group Listed

But there were key differences in the two lists. First, the new one included more large banks, including the Daiwa Bank, the Mitsui Bank (now Mitsui Taiyo Kobe Bank), and the Saitama Bank and the Kyowa Bank, which have merged.

The most interesting addition was the Soka Gakkai, Japan's biggest Buddhist organization. The list showed this powerful nonprofit group, which has been involved in several other scandals this year, received slightly more than $3 million from Kokusai Securities, which is affiliated with Nomura Securities.

Soka Gakkai is also affiliated with one of Japan's leading opposition parties, the Komeito, or Clean Government Party. This is the first confirmation of widespread rumors that politicians benefited, even if indirectly, from the improper payoffs. Most of the 13 securities firms that made the payments are affiliated with larger brokerage houses and banks. For instance, New Japan Securities Is affiliated with the Industrial Bank of Japan. Kenkaku Securities is affiliated with Dai-Ichi Kangyo, the world's largest bank. Sanyo Securities is affiliated with Nomura Securities, and Tokyo Securities is close to Nikko Securities.