The president of AIJ Investment Advisors Co., the company at the center of a deepening scandal over missing corporate pension funds, depended on connections with retired officials of the Social Insurance Agency (SIA) to drum up business.
One instance involved investing at least 10 million yen ($121,000) in a pension consulting firm that was headed by a former SIA official.
The offices of AIJ were searched on March 23 by investigators of the Securities and Exchange Surveillance Commission (SESC) in an effort to trace billions of yen in assets invested by corporate pension funds.
According to the head of the pension consulting firm, the company was established in January 2004 and another headed by AIJ's president, Kazuhiko Asakawa, contributed 10 million yen in capital, which was two-thirds of the consulting firm's total capital.
After 2004, AIJ signed a contract with the consulting firm and became a client. Asakawa participated as a lecturer in seminars held by the consulting firm aimed at corporate pension funds seeking ways to invest.
Asakawa visited pension funds with the consulting firm head and explained what services could be provided. Many of the pension funds visited had retired SIA officials working for them. The SIA is now known as the Japan Pension Service.
AIJ apparently used those connections to bolster its business clientele base among pension funds.
The consulting firm moved its office to the same location as Asakawa's company that provided the capital and used it from April 2004 until September 2005. A number of executives of the consulting firm also served as executives of AIJ.
An official with a pension fund said, "The consulting firm head and Asakawa worked almost as a team in their sales pitches to pension funds."
However, the consulting firm head said, "While there was a period when we used desks at Asakawa's company, we never visited other companies together in seeking new business."
The consulting firm head had a falling out with Asakawa from about 2009. The pair squabbled over the lack of information disclosure with regard to pension funds. The contract with AIJ was also canceled.
The consulting firm head said, "Asakawa probably tried to use me as a seller."
According to a March 23 announcement by the welfare ministry, of the 74 pension funds that had placed funds with AIJ for investment purposes, 47, or about 60 percent, had 49 executives who were retired central government ministry officials. Forty-six of those officials formerly worked either at the welfare ministry or the SIA.
Meanwhile, as SESC officials began their search of AIJ and other offices on March 23 looking for violations of the Financial Instruments and Exchange Law through false promises of high returns, sources said those officials were also considering the possibility of fraud charges that would carry stiffer penalties.
One allegation that will be looked at concerns transactions made by AIJ when clients sought reimbursement after canceling the contract.
To come up with those funds, AIJ allegedly had other clients acquire assets that had decreased greatly in value at inflated prices. Sources said such transactions could constitute fraud.
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