Police on June 19 arrested four people on suspicion of fraud in a scandal involving more than 100 billion yen ($1.2 billion) in missing pension funds that shattered confidence in investment advisers.
The suspects are Kazuhiko Asakawa, 60, president of AIJ Investment Advisors Co., Shigeko Takahashi, 53, an AIJ director, Hideaki Nishimura, 56, president of ITM Securities Co., and Yasukazu Kosuge, 50, an ITM director.
The four are suspected of defrauding two pension funds of about 7 billion yen in pension assets between June and August 2011 by having them conclude contracts based on false investment performances, police said. In reality, sources have said, AIJ had been drowning in losses for many years and was operating on a shoestring.
The sources said 94 corporate pension funds and other customers had entrusted AIJ with 146 billion yen of their money as of December 2011. Most of those funds are now missing.
Sources close to ITM Securities, an AIJ affiliate that sold AIJ’s investment trust products to pension funds, have told police that Asakawa gave direct instructions on the sales methods, according to investigators.
Investigators from Tokyo’s Metropolitan Police Department, the Tokyo District Public Prosecutors Office and the Securities and Exchange Surveillance Commission searched about 20 locations on June 19, including a building in Tokyo’s Chuo Ward that houses the head offices of AIJ and ITM Securities.
After the AIJ scandal came to light in February, the Financial Services Agency suspended the company’s operations to prevent a further loss of assets.
In March, the SESC started investigating suspicions that AIJ had contracts concluded based on false information, a violation of the Financial Instruments Exchange Law.
The MPD has also been looking into a fraud charge under the Criminal Law, which carries stiffer penalties, with the SESC and the Tokyo District Public Prosecutors Office.
Speaking as a sworn witness at the Diet in April, Asakawa admitted that he overstated AIJ’s investment performances, but he denied any intention of defrauding his customers.
Nishimura said he was not aware that AIJ was falsifying its investments and denied any intent to defraud.
However, police suspect AIJ was in such dire financial straits since spring 2009 that it used much of the funds from new contracts to pay for cancellations—and did not make new investments.
Investigators say that having customers conclude contracts under such circumstances constitutes fraud.
Asakawa worked at Nomura Securities Co. for about 20 years and established a predecessor of AIJ in 2000. Nishimura worked at the now-defunct Yamaichi Securities Co. for about 20 years and set up ITM Securities in 1998, according to sources.
ITM Securities fell into financial difficulties in 2002, and Asakawa bailed out the company by investing 1 billion yen. At one time, AIJ owned more than 90 percent of ITM Securities.
Nishimura told the Diet that AIJ was essentially ITM’s parent, and that ITM did as it was told by AIJ.
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