Ex-Daiwa Exec Indicted on Conspiracy

A former general manager of Daiwa Bank’s New York branch was indicted Wednesday by a federal grand jury on charges he conspired to hide a $1.1-billion loss stemming from a worker’s unauthorized trades.

Masahiro Tsuda was charged by the U.S. attorney for the Southern District of New York with attempting to defraud the Federal Reserve Board by concealing the losses incurred by Toshihide Iguchi, a former Daiwa trader in New York.

Tsuda, who oversaw Daiwa’s New York branch, was arrested in November following Iguchi’s arrest in September. Both were charged by the FBI in a scandal that led to criminal charges against the bank and a shutdown of its U.S. subsidiary.

Wednesday’s indictment against Tsuda mirrored the FBI charges and were the next required legal step prior to trial.

Tsuda, free on a $500,000 bond secured by $100,000 cash, will be arraigned on the indictment on Jan. 4. He faces a maximum sentence of eight years in prison and $500,000 in fines if convicted.

Tsuda’s lawyer, Stanley Arkin, said in a statement that the indictment is “unwarranted and unjust.”

He said Tsuda followed “what his employer and the Japanese Ministry of Finance determined was the only appropriate course here: that a thorough investigation of Iguchi’s extraordinary trading loss be conducted before a report was filed with U.S. regulators.”

“What happened was a good-faith misunderstanding, not a crime,” Arkin said.

According to the indictment, Tsuda failed to file a criminal referral with the Fed between July, when he learned about the losses, and September.

Instead, he took a number of steps to prevent discovery of the loss and hid records at his Manhattan residence to further conceal evidence of Iguchi’s crimes.

“The purpose of these unlawful transactions was to ensure that the $1.1-billion loss was not properly recorded on the books and records of the New York branch and to prevent the discovery of these losses by United States authorities,” the indictment said.