Japan Political Kingpin Tied to Firm’s Huge Loss : Scandal: Ruling party figure, top gangster blamed in deals that cost company $774 million, court hears.

A deal between Japan’s political kingpin and Tokyo’s top gangster spurred the largest breach of trust in this country’s history, inflicting a $774-million loss on Tokyo Sagawa Kyubin, a parcel delivery company, prosecutors asserted Tuesday.

The charges were made in Tokyo District Court against Hiroyasu Watanabe, 58, former president of Tokyo Sagawa. He is accused of authorizing loans and loan guarantees to firms, many of which were affiliated with Inagawa-kai, the largest gang in Tokyo; prosecutors say he knew the money would not be recovered.

Prosecutors identified Watanabe as a middleman between Shin Kanemaru, 78, the ruling Liberal Democratic Party’s top power-broker, and the late Susumu Ishii, the Inagawa gang’s chief. Their deal, prosecutors indicated, helped Noboru Takeshita win the premiership in 1987.

Kanemaru heads the largest ruling party faction that also put Prime Minister Kiichi Miyazawa in office last November.

Last year, Ishii was identified as having received $286 million in financing for stock purchases from Nomura and Nikko Securities, two of Japan’s largest brokerages; prosecutors repeated that allegation Tuesday. A firm affiliated with Ishii’s gang also invested in real estate and stocks in America with paid advice from Prescott Bush, President Bush’s brother.

Watanabe maintained that he was unfamiliar with details of a host of Tokyo Sagawa transactions that prosecutors described. He pleaded innocent and said he did not intend to inflict losses on his company. He also denied media reports that he had given prosecutors the names of more than 10 politicians, who, officials assert, received $14.2 million from him; that money reportedly came from a slush fund set up with rebates from recipients of Sagawa loans.

“I gave no such testimony to prosecutors, and it is incomprehensible to me that such reports have been carried in the mass media,” Watanabe told Judge Junichi Koide.

But Kanemaru publicly admitted Aug. 27 that Watanabe gave him $4.1 million to help finance campaigns of Kanemaru’s followers for a lower house election in 1990.

Accepting “moral responsibility” for failing to file a contribution report required by law, Kanemaru resigned as vice president of the ruling party. He also announced that he would step down as chairman of the 111-member faction once headed by Takeshita; the “Takeshita faction” has refused to accept his resignation.

Prosecutors did not identify Kanemaru by name Tuesday. But a reference to “a politician with whom Watanabe was associated” pointed directly at him.

Prosecutors said they intend to prove that “the politician” went to Watanabe in September, 1987, to seek his help to end “troubles” with an ultra-right group. The “troubles” were not detailed. But the date made it clear that prosecutors referred to ultra-right street parades in Tokyo; they featured sound trucks blaring sardonic slogans against Takeshita, a Kanemaru disciple who then was running for prime minister.

Watanabe, prosecutors assert, asked Ishii to stop the harassment; he complied. Takeshita was elected in November, 1987.

Other gangland interventions requested by Watanabe to solve politicians’ “troubles” followed, prosecutors said without elaborating. In return for favors for Watanabe, Ishii started asking the Tokyo Sagawa president for loans and loan guarantees for firms run by Inagawa associates, and Watanabe agreed, prosecutors said.

Kanemaru also was accused of trying to help Watanabe by calling a bank president to ask him to approve an $813-million loan to Tokyo Sagawa; Watanabe feared the firm would fall into a bankruptcy that would reveal its gangland connections and political contributions. Kanemaru also tried to dissuade the Sagawa Group’s chairman from pressing charges against Watanabe. Both attempts failed.

Leaders of opposition parties said they would demand that Takeshita and Kanemaru be summoned to testify in Parliament. Both leaders’ offices refused to comment on the charges revealed Tuesday. Miyazawa’s chief Cabinet secretary refused to comment during a news conference.

In earlier admitting he took $4.1 million from Watanabe, Kanemaru did not mention his alleged request for gangland help to suppress harassment of Takeshita. Nor did Kanemaru discuss his reported interventions on Watanabe’s behalf.

If convicted of violating Japanese laws that forbid contributions of more than 1.5 million yen ($12,195) a year to any individual politician, Kanemaru would be subject to a fine of not more than $1,626. But no charges have yet been filed against him and he has refused prosecutors’ requests to submit voluntarily to questioning.

Prescott Bush has admitted he worked for Hokusho as a consultant on American investments but has insisted he did not know of Hokusho’s gangland connection. Ishii died in September, 1991, after being hospitalized for treatment of a brain tumor.