Leading Bank Caught Up in Newest Scandal : Japan: Six people with ties to a trading company backed by Sumitomo Bank were charged with illegal stock transactions and fraudulent art deals.

Another financial institution linked to Japan’s business elite had its reputation sullied further Tuesday as six people were arrested in a scandal involving illegal stock transactions and nearly $300 million in fraudulent art deals.

Among those arrested was Yoshihiko Kawamura, 66, the former president of Itoman, an ailing trading company that has been kept alive by loans from Sumitomo Bank.

Sumitomo--the world’s largest bank in terms of capital and second largest in assets and a pillar of the Japanese business community--ousted Kawamura as president of Itoman on Jan. 25. He and Sadamu Takagaki, 59, a former Itoman vice president, were charged Tuesday with illegally purchasing shares in Itoman. (Japan’s Commercial Code forbids members of a board from purchasing stocks in their own company.)

Also arrested were Ho Young Jung, 44, a Korean businessman in Osaka who runs a group of 60 companies and at one point owned 19% of Itoman’s stock, and Suemitsu Ito, 46, a former managing director of Itoman.

The Asahi newspaper decribed Ho as a “kingpin of underground money.” Ito, before joining Itoman in early 1990, ran a chain of wedding halls and was known as a real estate speculator who specialized in driving up land prices. Itoman fired him last fall.

They were charged with bilking Itoman of $287.4 million by selling the trading firm 219 artworks at prices of up to three or four times their actual value.

Two business associates of Ho, Kazuhiko Takayama, 31, and Masamitsu Sato, 59, also were arrested for falsifying documents that purported to certify the value of the artworks.

Based upon the faked evaluations, Itoman paid $412.6 million for the artworks but later discovered they were worth only $125.2 million.

Charges filed against the six businessmen covered only a small part of a reported chain of illicit Itoman transactions.

Numerous loans totaling hundreds of millions of dollars were reportedly made by Itoman to various enterprises, including golf courses, run by Ito and Ho. Ho told Asahi in February that he owed Itoman more than $1.3 billion. Ito was reported to have defaulted on about $1.5 billion in debts to Itoman.

More trouble for Itoman appears likely when $703 million in promissory notes it guaranteed for Cosmos World, a golf course developer, come due, beginning in September, the Yomiuri newspaper reported. The firm is owned by Minoru Isutani, who purchased the Pebble Beach Golf Course in Northern California.

Japanese newspapers reported that prosecutors’ investigations are continuing.

The arrests Tuesday dealt a further blow to the prestige of the Sumitomo Bank. That’s because the illicit transactions occurred while Kawamura--who worked for Sumitomo for 33 years and was sent by the bank to rescue Itoman in 1975--was in charge of the Osaka-based trading firm and helped plunge it into even more severe financial difficulties.

Kawamura succeeded in lifting Itoman from its mid-1970s slump by expanding its activities into real estate and other new fields with the help of Sumitomo loans. But the firm fell back into trouble as interest rates rose and land prices began to dip.