Daiwa Exec Pleads Guilty in Trading Case
A former general manager of Daiwa Bank’s New York branch pleaded guilty Thursday to aiding a cover-up, disposing of the only outstanding charges arising from the $1.1-billion bond-trading scandal.
Masahiro Tsuda was one of two bank employees charged in the extraordinary cover-up that was disclosed last summer by the Japanese bank. The central figure in the scandal was Daiwa bond trader Toshihide Iguchi.
But the plea agreement between Tsuda and U.S. prosecutors raised the possibility of further federal action. The scandal already has forced Daiwa Bank Ltd. to shut its U.S. operations and pay the largest criminal fine ever levied against a financial institution in the United States.
Tsuda agreed to cooperate with prosecutors in a continuing investigation into the bank’s New York office, and he implicated several top bank managers in his courtroom confession to U.S. District Judge Sidney Stein.
Tsuda, 54, wearing a dark blue suit and speaking slowly in a firm voice, put the blame squarely on his superiors in Japan, contending that they repeatedly advised him to fabricate records and not to immediately report the losses.
“In Japan, I believe it is customary for a bank to wait until completing an internal investigation before reporting an employee’s wrongdoing to the appropriate authorities,” he told Stein in the lower Manhattan courtroom. “However, I knew that in the United States such reports should be made more swiftly and that an internal investigation was not a justification for not reporting in a timely fashion.”
Tsuda, who until Thursday had adamantly maintained his innocence, continued to be portrayed by his lawyer as a victim of international forces. That would include a warning against disclosing the cover-up by the Japanese Ministry of Finance.
“This is a case in which extraordinary international, political and economic pressures have swallowed up one loyal employee stationed in his company’s outpost,” said Tsuda’s attorney, Stanley Arkin.
Tsuda remains free on bail awaiting sentencing July 12. He faces up to five years in prison and as much as $250,000 in fines.
Tsuda’s subordinate, Iguchi, pleaded guilty last fall to doctoring bank records and embezzlement in a scheme to hide $1.1 billion in trading losses he accumulated over 12 years.
Daiwa Bank pleaded guilty in February and agreed to pay $340 million in fines. In an earlier punishment by U.S. banking regulators, it halted operations in this country on Feb. 2.
In his courtroom confession, Tsuda detailed a conspiracy involving the highest echelons of Daiwa management.
Among the things he said he discussed with Daiwa managing director Hiroyuki Yamaji, Tsuda’s superior, and Fumio Kitora, a Daiwa Trust executive, were various strategies for concealing Iguchi’s losses.
