Daio Paper ex-chief held over massive loans said for gambling
Posted By Admin on December 1, 2011
TOKYO (Kyodo) — Prosecutors arrested former Daio Paper Corp. Chairman Mototaka Ikawa on Tuesday in connection with his massive borrowings from Daio Paper group companies for personal use in gambling, alleging that he has caused 3.2 billion yen in damage to the firms.
The 47-year-old Ikawa, grandson of the publicly traded papermakers founder, admitted to aggravated breach of trust, investigative sources said. In a statement issued through his lawyer, he admitted to having taken out over 10 billion yen in loans from Daio Paper group companies and used almost all of it on gambling at casinos.
It is all my fault and I deeply regret it, Ikawa said. He also noted that he acted alone and takes sole responsibility, stressing that executives at the subsidiaries and others involved had merely extended the loans in response to his requests.
The sources said Ikawa had told the executives of the subsidiaries not to disclose his borrowings to his father Takao Ikawa, who formerly served as the papermakers adviser, when he instructed them to remit the money to his bank accounts by the phone.
Among those executives, one was requested by Ikawa to remit several hundred million yen by the following day, the sources said.
While the prosecutors are still investigating the full extent of Ikawas dubious loans, they arrested him on suspicion of instructing four subsidiaries to remit a total of 3.2 billion yen in seven installments to various bank accounts, including his own, between July and September this year, causing damage to the firms.
The investigators began questioning Ikawa earlier on Tuesday morning and raided his homes and other related property in Tokyo and Shikokuchuo, Ehime Prefecture, the sources said. The company is double headquartered in these cities.
The moves came after Daio Paper, Japans third-largest paper manufacturer, filed a criminal complaint against Ikawa on Monday for causing 8.58 billion yen in damage to the group companies.
Ikawa said in Tuesdays statement that he had planned to pay back his debts with cash and by selling his stock holdings but that the repayments have not been realized due to various problems, without elaborating.
According to a report by Daio Papers in-house investigative committee, Ikawa instructed seven subsidiaries to remit a total of 10.68 billion yen in 26 installments to various bank accounts between May last year and September this year. He has repaid 2.1 billion yen of the total in cash.
The bank accounts included his own personal account and those of companies related to casinos. The loans had been extended without collateral or prior approval by the companys board.
The report said the executives of the subsidiaries blindly followed instructions by Ikawa.
Separate from the 10.68 billion yen, the former chairman was also found to have borrowed 530 million yen from a company affiliated with Daio Paper.
The investigators suspect the total sum of borrowings may be even larger, and are looking into whether Ikawa had been aware of the violations when taking out the loans and how he used the money.
Daio Paper apologized in a statement to its shareholders and others involved, promising to rebuild corporate governance.
After Ikawa resigned in September over the scandal, the paper company also dismissed his father as a company adviser, and his younger brother Takahiro Ikawa as a member of the firms board of directors.
The company has been moved to a watch list on the Tokyo Stock Exchange in light of the scandal and will be delisted if it fails to release its April to September earnings by Dec. 14, a month from the initial schedule.
The former chairmans arrest came on the heels of another scandal involving camera and medical equipment maker Olympus Corp., further revealing the extent of corporate governance problems in Japan.
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