World Bank Penalizes 2 Japanese Companies

The World Bank has removed two top Japanese securities firms from a billion-dollar bond underwriting group, and a newspaper reported that they were penalized because of their ties to gangsters.

Nomura Securities Co., the world’s largest brokerage, and Nikko Securities said they will seek to be readmitted to the group.

The two companies, which have admitted dealing with a former underworld boss, were at the center of a scandal involving compensating favored clients for stock market losses.

The case is one of a spate of financial scandals involving Japanese banks and securities firms.

A Nomura statement said the company “solemnly accepts the decision (by the World Bank) as a disciplinary action.”

Spokesman Yukinori Yamamoto said Nikko Securities was shocked to learn of its suspension. “Nikko is resolved to do its best to be able to come back (to the syndicate) as early as possible,” he said.

The World Bank, based in Washington, is an organization with more than 150 member nations that lends money for projects in developing countries.

Nomura has been a member of its underwriting syndicate since September, 1989, when the World Bank began floating bonds on the U.S., Japanese and European markets. Nikko joined last year.

The nationally circulated newspaper Asahi Shimbun said the World Bank acted because of the companies’ gangster ties. Asahi said the bank did not specify how long the suspension would last.

Nomura has acknowledged that it provided about $116.8 million in loans to Susumu Ishii, a former gangster boss who died last week. Ishii headed the Inagawa-kai, Japan’s second-largest yakuza group.

Nomura and Nikko were among major Japanese brokerages that infuriated small investors by paying favored clients millions of dollars to cover stock market losses. The practice is not illegal unless it is promised in advance.