Buried in the books
by Benjamin Fulford
Forbes Global
January 8, 2001Japan has more than its share of banks with rotten loan portfolios, and Nippon Credit Bank (NCB) was one of the worst. When it went bankrupt in 1998, at least $36 billion, probably much more, of its $133 billion loan portfolio had gone bad. Some of the bad loans were linked to an underworld stretching from Osaka in the industrial heartland to the murky reaches of North Korea.
In May the government persuaded three deep-pocketed investors—Softbank, the Internet venture company; Orix Credit, a leasing company; and Tokio Fire & Marine Insurance—to rescue the bank. The government agreed to take any bad loan off its books at face value. The three rescuers infused close to $1 billion in new capital. As of Sept. 30, the bank was down to $52 billion in assets, only $7.5 billion of those assets officially nonperforming, and was trying to reestablish itself.
To clean up the mess the new owners hired Tadayo Honma, a respected 60-year-old former director of the Bank of Japan. He became president of NCB in early September and set to work poking through what was left of the loan portfolio, looking for other rotten apples to be handed over to the government—a trigger for further writeoffs throughout the banking system.
Honma didn't last long. Two weeks later he was dead. His body was found in an Osaka hotel room. Details of the scene have been sketchy and varied, but most accounts have pointed to strangulation by hanging. Notes addressed to his family, company and others were nearby.
In the U.S. such a sequence of events would put a homicide investigation into high gear. Not in Japan. Honma's body was quickly cremated, with no autopsy, says his son, Masazumi Honma. The Osaka police ruled the death a suicide.
Honma's is the seventh "suicide" of ranking Japanese—who were either investigating financial irregularities or due to testify about such irregularities—since 1997, when the depth of bad loans affecting banks like Nippon Credit was acknowledged. Among the dead are a member of parliament who was about to talk about irregular fundraising activities; another Bank of Japan director who oversaw small financial institutions; an investigator at the Financial Supervision Agency; and the head of the small and medium financial institutions division at the Ministry of Finance. So far as we can tell, not one of these seven cases resulted in a homicide investigation. The powers that be in this country just aren't very interested in turning over rocks.
There's another, darker scenario bandied about by Japan's yakuza gangs. Theirs is a world in which victims are visited at night in hotel rooms, forced to write wills, injected with sedatives, then strangled in a way that makes it appear that they committed suicide by hanging. According to a Japanese lawyer specializing in organized crime, "This is a well-known gangster modus operandi, especially for political murders."
In the Honma case, clues point to foul play: Kyoko Yoshii, a spokesman for the Hankyu International Hotel, where the body was found, says that the rooms are designed to thwart suicide by hanging, and one report put the dead man slumped against a wall. Then there was, according to the Japanese women's magazine Josei Seven, the fleeting posting on an Internet chat page by Kumiko Mori, a locally popular tv show host and the original voice of the Pokémon character Pikachu. Mori, whose room was next to Honma's, told of complaining to the hotel management about shouts and wails that night. The web page was shut down after the magazine article appeared, and though her manager admits that she made the comments, he says that there was confusion about the details and refuses an interview request with his client.
In sensitive cases it is common for police to receive wave-off calls from powerful political officials; two second-hand sources suggest that happened. In response to written questions about that and other anomalies of the investigation, the deputy chief of the Sonezaki police station in Osaka said, "No comment."
Whatever happened to Honma, it is clear he would have had to wage a lonely war against dirty credits. This is, after all, a country that does not want to own up to weaknesses in its banking system. Financial inspectors do not look for criminality when inspecting banks, even where managers treat the institutions as their private property, says Kenzaburo Gomi, past head of the inspection department of Japan's Financial Supervision Agency. The de facto policy is not to prosecute clear breaches of trust, says Kohei Nakabo, the head until recently of Japan's Resolution & Collection Corp. Even when white-collar banking cases are pressed, trials typically drag on until defendants die of old age. The rare sentences tend to be suspended. In a departure from usual practice, three top NCB executives were arrested for accounting fraud for showing the bank to be fully solvent only months before it went under. Once the spotlight was off, however, the cases were quietly dropped. There are a couple of minor NCB cases, but they are not expected to lead to prison time.
Internal documents of NCB obtained by FORBES GLOBAL show that hundreds of millions of dollars in nonperforming loans were made to at least four companies that have appeared on a police list of gangster-related enterprises. There were also highly suspect entries, such as a $150 million loan to one "Fukutoshin Kenkyujo," labeled in the bank's books as a "nonexistent company."
NCB's suspicious history dates back decades and includes previous mysterious suicides and suspect loans linked to various political power brokers and gangsters. Of all the dirty laundry, though, the likeliest link to any foul play in Honma's death involves the financial underpinnings of a million North and South Korean citizens in Japan, whose presence is not widely appreciated by other foreigners. The NCB loan records show hundreds of millions, probably billions, of dollars were lent to Korean credit cooperatives—presumably to cover their own shaky balance sheets.
In spring 1999, 13 of the cooperatives became insolvent. All funds appear to have been transferred out of them immediately before they went under, Gomi, the former regulator, says. Some of these co-ops had long been used to funnel money to North Korea. One $130 million loan on the books used the grounds of a school run for North Koreans in Tokyo (asset value, $20 million) as collateral. A North Korean official told Japan's Asahi Television network that the money was taken as cash to the rulers in Pyongyang.
Japan's government tried recently to put the bankrupt companies under the wing of surviving cooperatives without conducting any investigation and with an unpublicized $3 billion first installment of what is expected to be a bigger cleanup. "It is extremely likely there has been political intervention" to hide the use of public money for this purpose, says Kiyoshi Ueda, a member of the minority Democratic Party who raised the issue in parliament after obtaining internal documents of Korean credit cooperatives.
A former director of one North Korean credit cooperative, Kim Chang Hong, was arrested in Japan in 1997 in a case involving 70 kilograms of amphetamines being smuggled aboard a North Korean freighter to Japan. "These banks would lend $50 million to a pachinko parlor with an annual turnover of $2 million as a cover for financing drug-smuggling operations," according to a gang source, who says that such money manipulations typically greased the palms of Japanese politicians as well as those of yakuza.
Japan has made a start at cleaning up its credit system. But until it sheds more light on matters both criminal and financial, investors will go on being skittish.