Japanese Firm Gives Up Trading Profits

A Japanese firm that sold U.S. takeover specialist T. Boone Pickens Jr. a big stake in Koito Manufacturing Co. was forced Tuesday to pay Koito nearly $9 million in stock trade profits under Japan’s securities laws.

A statement by Koito said Azabu Building Co. relinquished the profits gained in short-term buying and selling of Koito shares between November, 1988, and February, 1989. It was unclear whether the profits Azabu returned were from its sales to Pickens, who is now Koito’s largest shareholder.

Under Japanese securities laws designed to prevent insider trading and stock price manipulation, a firm owning more than 10% of another company must return to that company any profit it makes from buying and selling its shares within a six-month period.

Pickens’ interest in Koito, an auto parts maker, has attracted much attention in Japan because of the takeover strategist’s reputation for unwelcome advances on companies in the United States.

Some Japanese saw Pickens’ move as an attempt to manipulate Koito’s stock price. Pickens has claimed that his purchase of Koito stock was purely a long-term investment, and the difficulties he’s faced since becoming the company’s largest shareholder are now an issue in U.S.-Japanese trade relations.

Koito refused to grant Pickens a seat on its board, even though he traveled to Japan recently to request participation in its management.

It was Koito’s concern about Pickens’ moves that made it request a Ministry of Finance investigation that may have led to discovery of Azabu’s rapid turnover of shares.