4 Japan Executives Arrested in Stock and Bribery Scandal

The founder of Recruit Co. and three other businessmen were arrested today in a stock-trading scandal that has shaken Japan’s governing party and contributed to its loss in a special parliamentary election.

Recruit reportedly sold tens of thousands of unlisted shares of stock at bargain prices to politicians, their aides and other prominent people. The purchasers then profited when the stocks were publicly traded and skyrocketed in value. The scandal has also involved direct political donations by Recruit.

Prosecutors said they today arrested Hiromasa Ezoe, founder and former chairman of the information services conglomerate. Also arrested were a vice president of a Recruit subsidiary and two former officials of Nippon Telegraph and Telephone, Japan’s largest company.

The Recruit officials were arrested on suspicion of giving bribes, the two Nippon officials in connection with receiving bribes, news reports said.

Taken From Hospital

Prosecutors said Ezoe was taken from a hospital where he had been under treatment for exhaustion since the scandal was uncovered last summer.

Three Cabinet ministers and more than a dozen other prominent politicians and businessmen have since resigned in the scandal, which has led to broader questions about political fund-raising and links between business and politics.

The country’s largest opposition party, victorious in Sunday’s by-election, demanded today that Prime Minister Noboru Takeshita resign or dissolve Parliament “so the people can express their will” about the Recruit scandal.

Takako Doi, head of the Japan Socialist Party, told Parliament that her party’s victory in the election in Fukuoka in southern Japan showed that the public has lost faith in the corruption-tainted Takeshita administration.

The balloting was widely seen as a test of the damage done by the scandal.

Takeshita refused to dissolve Parliament, which would mean calling new elections for its lower house.

“The election (Sunday) showed that people in Fukuoka won’t put up with any more (of Takeshita’s policies),” Doi told cheering opposition lawmakers today. “Either the entire Cabinet must resign, or the prime minister must dissolve Parliament so the people can express their will.”

A dissolution of the Diet, Japan’s Parliament, would force an election for the lower house, where Takeshita’s governing Liberal Democratic Party has more than 300 of the 512 seats. An election is scheduled in July for half of the seats in the upper house, which cannot be dissolved.