Payoff Scandal in Japan Spurs Brokerage Raid

Some 100 investigators raided the offices of Yamaichi Securities Co. today as a scandal over payoffs to a corporate racketeer widened to implicate Japan’s fourth-largest brokerage.

Reports of the raid sent Japan’s main stock index tumbling by as much as 0.5%. Brokerage shares fell 2.5% and Yamaichi fell by as much as 26 yen, or 8.6%, to 275.

“People don’t want to touch financials--including brokerages,” said Isao Takahashi, director of Japanese equities at HSBC James Capel Japan Ltd.

Japan’s Finance Ministry today will hand down punishments to Nomura Securities Co., Japan’s largest brokerage, and Dai-Ichi Kangyo Bank Ltd., one of the world’s largest banks, after finding they paid off Ryuichi Koike, an admitted “sokaiya,” or corporate extortionist.

A Yamaichi spokesman declined to comment on the raid, saying the company may comment through the Tokyo Stock Exchange.

Japanese media have reported that authorities are investigating similar allegations about Japan’s other “Big Four” brokerages--Nikko Securities Co. and Daiwa Securities Co. The Nihon Keizai newspaper said Daiwa paid about 200-million yen in 1993 to Koike to compensate him for trading losses.

Nikko shares fell as much as 31 yen, or 4%, to 660. Daiwa shares fell as much as 44 yen, or 5%, to 821.

Analysts said those declines should be short-term.

“I don’t think it really should be a surprise for everyone who reads newspapers and follows the TV. It was well known that the ‘sokaiya’ at the center of the DKB and Nomura scandals had relationships with other brokerage houses,” said Brian Waterhouse, senior analyst HSBC James Capel Japan Ltd.

Today’s Mainichi newspaper said authorities were investigating charges Yamaichi Securities made $678,000 in illegal payments to Koike in 1995.