Mr. Tsutsumi is called to account

堤コクド前会長逮捕

    The former chairman of Kokudo Corp., the privately held firm that effectively controls the Seibu Railway group, is suspected of underreporting Kokudo's ownership stake in Seibu by using the names of employees to tag blocks of stock that were then sold to scores of the group's business partners who were not told the truth about the reason for the sale. Prosecutors should conduct a thorough investigation into the role played by the 70-year-old business tycoon.

    The scandals have exposed the dark side of the Seibu Railway group, one of Japan's leading business conglomerates. In particular, they have focused a spotlight on its old-fashioned and clandestine corporate culture. Mr. Tsutsumi, who had ruled the group for 40 years, bears grave responsibility for all this. He has betrayed the trust and confidence of not only shareholders but millions of ordinary people who use Seibu trains, hotels and department stores, and watch Seibu-sponsored professional baseball games.

    According to investigators, Kokudo, the largest shareholder of Seibu Railway, lied about its Seibu ownership stake to get around a Tokyo Stock Exchange rule that caps holdings by major shareholders. To make its bloated ownership look smaller than it was, Kokudo allegedly transferred part of that stake to employees — on paper only — and presented financial reports that excluded the "transferred" portion.

    Of course, such underreporting of stock holdings misleads bona fide investors and hampers the formation of fair market prices. That's why it is prohibited by law. Any violator, not just Kokudo, should be duly punished. So the strong action taken by prosecutors should not come as much of a surprise, notwithstanding Mr. Tsutsumi's high-profile career.

    Investigations reveal that, because Kokudo and nine other major companies held more than 80 percent of Seibu stock before the reporting violation came to light, Seibu risked losing its membership on the stock exchange.

    So, from August to September 2004, before publicly acknowledging its non-compliance (Seibu Railway was delisted in December), Kokudo sold large numbers of Seibu shares to some 70 business associates. Mr. Tsutsumi is said to have personally arranged sales without telling buyers about the possibility of Seibu being delisted. Prosecutors believe this constitutes a violation of the law against insider trading.

    Insider trading refers to transactions in stock and other securities conducted by people with "insider information" — such as confidential knowledge that company executives and major shareholders might have acquired during merger or acquisition talks. The Securities and Exchange Law was revised in 1984 to prohibit deals that enable traders to make huge profits or avoid losses as a direct result of their being tipped off on "important facts related to the business" that may affect stock prices just before this information is disclosed publicly.

    The law states specifically what kinds of information represent "important facts" and in what circumstances their disclosure is required. This definition, however, has tended to limit the extent to which the law can be applied, although attempts have been made to broaden its coverage. In the Seibu case, a number of questions have yet to be resolved legally to establish evidence against Mr. Tsutsumi beyond doubt.

    It remains unclear, for example, whether Mr. Tsutsumi made profits or avoided losses behind the scenes — a question that cuts to the core of whether insider trading has occurred. The question provides an important criterion for deciding whether Mr. Tsutsumi should be indicted.

    Prosecutors seem confident of their ability to build a solid case. It is likely, though, that the question will be contested in court if he is indicted.

    However the case develops, it is certainly a disgrace for corporate Japan that one of its icons has been arrested on charges of false reporting and insider trading. To restore its credibility, the Seibu Railway group has no choice but to reinvent itself. That will require, first and foremost, transforming its autocratic, secluded and antiquated system of management into one that is liberal, open and modern — the kind of system that the market welcomes.

The Japan Times Weekly
March 12, 2005
(C) All rights reserved

      西武鉄道は非上場会社のコクドに実質的に支配されているが、コクドの保有株を従業員名義に偽装しその比率を過小記載したとされる。コクドの持株は、理由の説明なしに同グループ取引先に売却されたという。

      今回の不祥事は西武グループの旧態依然たる秘密主義の社風を浮き彫りにした。この問題に対する堤容疑者の責任は重い。

      東京証券取引所は、上場企業の大手株主の持株比率に制限を設けている。この制限に抵触するのを避けるため、コクドが保有していた西武鉄道株の一部は従業員名義に偽装された。

      持株比率の虚偽記載は、一般の投資家を欺き、公正な株価の形成を妨げる。

      コクドを含む西武グループ10社は、問題の発覚前に西武鉄道株の80％以上を保有しており、上場廃止になる可能性があった。

      コクドは04年8月、9月に大量の西武鉄道株を取引先に売却した。堤容疑者も自ら株式を売却したが、上場廃止の可能性について一切説明しなかったという。

      インサイダー取引とは、企業の内部情報に通じた人物が行なう証券取引である。証券取引法は、株価に影響する「重要情報」を規定しているが、堤容疑者がインサイダー取引で利益を上げたか、損失を回避したかはまだ明らかでない。

      日本企業の象徴的人物が虚偽情報記載、インサイダー取引の容疑で逮捕されたのは実に残念なことだ。西武鉄道グループは独裁的、秘密主義で旧弊な経営方式を自由、透明かつ近代的な方式に改革せねばならない。市場は改革を歓迎するだろう。