Executive Resigns as Japan Stock Scandal Spreads : Chairman of Giant Phone Company Is Latest High-Powered Figure to Quit

Japan’s stock trading scandal gathered momentum Wednesday when Hisashi Shinto, chairman of Japan’s telecommunications giant Nippon Telegraph & Telephone Corp., resigned to take responsibility for his involvement in the affair.

Shinto’s resignation came five days after Finance Minister Kiichi Miyazawa quit his Cabinet post because of his role in the scandal, which has raised allegations of questionable stock transactions and potential influence-peddling by a long list of politicians, government officials and business leaders.

Aides to Shinto and Miyazawa--as well as Prime Minister Noboru Takeshita, former Prime Minister Yasuhiro Nakasone and other prominent Japanese--were given the special privilege of buying unlisted shares of Recruit Cosmos Co., a real estate developer. In many cases, they were given interest-free loans to help them do so. The investors later sold the stock at steep profits after the company was listed on the over-the-counter market in 1986.

In His Personal Account

Pressure mounted on Shinto to resign after local news reports disclosed Wednesday that nearly half the proceeds from his aide’s Recruit transaction, or about $74,000, had been deposited in Shinto’s personal bank account.

Post and Telecommunications Minister Masaaki Nakayama told reporters that Shinto, 78, denied any knowledge of the trading but accepted responsibility for the actions of his aide.

At least two other executives of NTT, a former government-owned monopoly that was privatized beginning in 1985 to become the world’s most heavily capitalized corporation, have admitted trading in Recruit shares.

Opposition members of Parliament denounced the trading because NTT has close business ties to Recruit Co., the parent of Recruit Cosmos, which is involved in the employment services and data communications fields.

In carrying out the trades, Shinto’s aide and the executives apparently violated government regulations making it illegal for officers of the former public corporation to receive cash or securities from business clients.

It was not clear whether Shinto or the others would be liable to prosecution in the case, but the special investigation unit of the Tokyo District Prosecutor’s Office is examining the relationship between NTT and Recruit in a widening criminal investigation of the scandal. Prosecutors reportedly questioned one of the NTT executives at the beginning of the month.

Resold U.S. Computers

NTT also engaged in a controversial transaction in which it purchased two supercomputers from Cray Research of the United States in 1986 and 1987 and immediately resold them to Recruit Co. at what one opposition member of Parliament charged were “bargain prices.” The opposition contends that the purchase was made under an informal agreement to help offset the bilateral trade imbalance.

NTT houses the supercomputers at its offices in Yokohama and Osaka and leases high-speed communication lines to Recruit, which rents out the computers on a time-sharing basis.

Ei Shikiba, who at the time was in charge of NTT’s high-speed-circuit leasing business, purchased shares in both Recruit and Recruit Cosmos in 1986, borrowing money from a financial company in the Recruit group.

Hisahiko Hasegawa, then responsible for NTT’s data communications business, also bought shares. Hasegawa resigned last year after he was accused of taking rebates from an advertising agency and is now president of Recruit International VAN, another subsidiary in the Recruit group.

Denied Special Favors

Both executives denied, in testimony before Parliament, that they used their positions to give any special favors to Recruit.

Shinto’s secretary, Kozo Murata, bought 10,000 shares of Recruit Cosmos in September, 1986, at 3,000 yen (now about $25) a share, and sold them later at 5,200 yen ($43) for a profit of about $164,000. Murata was a close and trusted aide who followed Shinto to NTT from Ishikawajima Harima Heavy Industries.

Shinto became chief executive of NTT in 1981 and assumed the title of president in 1985, when the company went private. He became chairman in June but retained the powers of chief executive.