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PRESS RELEASE ANNOUNCING CRIMINAL INDICTMENT OF DAIWA BANK, 11/2/95
United States Attorney
Southern District of New York
FOR IMMEDIATE RELEASE CONTACT: MARVIN SMILON
NOVEMBER 2, 1995 (212) 791-1937
MARY JO WHITE, the United States Attorney for the Southern District of
New York, and JAMES K. KALLSTOM, Assistant Director in Charge of the
FBI's New York Office, announced today that a 24-count indictment has
been filed in Manhattan federal court against THE DAIWA BANK, LTD.
("DAIWA"). DAIWA is charged with conspiracy, mail and wire fraud,
obstructing an examination of a financial institution, falsification of
bank records, and misprision of felonies by failing to disclose federal
The charges arise out of the unauthorized sale of securities from
DAIWA's custody account, including the sale of more than $375 million in
customer securities, by Toshihide Iguchi, a former Executive Vice
President at the New York Branch, which were used to cover trading
losses incurred by Iguchi; Iguchi's attempts to cover-up those losses
and unauthorized sales, which by 1995 had grown to more than $1.1
billion; and DAIWA'S attempts to continue the cover-up after learning of
Iguchi's illegal conduct; and DAIWA's alleged repeated attempts, dating
back to at least 1988, to obstruct the Board of Governors of the Federal
Reserve System and the New York State Banking Department.
According to the Indictment, DAIWA learned in mid-July 1995 that Iguchi
had lost more than $1.1 billion through unauthorized trading in United
States government securities, and the sale of securities belonging to
DAIWA's customers to conceal those losses. Rather than disclose IGUCHI'
8 crimes to law enforcement authorities, as DAIWA was required by law to
do, DAIWA allegedly attempted to conceal the losses and missing
securities by, among other things: making extensive false entries in its
books and records to hide the losses and preclude law enforcement action
in the United States; removing the records of these crimes from DAIWA's
New York offices and secreting them in the apartment of the manager of
DAIWA's New York Branch; sending false account information to its
customers; filing a false report with the Federal Reserve Board; and
otherwise attempting to prevent law enforcement officials from
discovering these crimes.
The charges against DAIWA in the Indictment that relate to the cover-up
after DAIWA learned of Iguchi's activities include: a charge that DAIWA,
acting through senior DAIWA officials, both in Japan and New York,
conspired to defraud the Federal Reserve Board, to make false statements
to the Federal Reserve Board, and to falsify DAIWA's books and records
to prevent discovery of the $1. 1 billion trading loss; misprision of
felonies based on DAIWA's failure to report and affirmative concealment
of federal crimes; and several counts of falsifying bank books and
records. The Indictment also charges DAIWA in four counts of mail and
wire fraud with defrauding DAIWA'S customers in connection with the
unauthorized sale of $377 million in customer securities by Iguchi; and
multiple counts of falsifying books and records arising out of Iguchi's
efforts at covering-up his trading losses.
DAIWA is also accused in the Indictment with conspiring to defraud the
Federal Reserve Board between 1988 and 1995 by providing false
information about the location and supervision of its traders. The
indictment alleges that DAIWA temporarily relocated traders from one
location to another and disguised a trading room as a storage room prior
to a bank examination in order to deceive banking authorities. DAIWA is
also charged with one count of obstructing an examination of a financial
institution in connection with that conduct.
Ms. WHITE stated that, "DAIWA was indicted today, not only because its
former officer, Toshihide Iguchi, committed serious crimes, but because,
as charged in the Indictment, DAIWA and a number of its highest senior
officials themselves committed crimes as they attempted to cover-up
other crimes. The message to the financial community from today's
indictment should be clear and unambiguous: law enforcement will not
tolerate financial institutions who unlawfully attempt to mislead
regulatory authorities and coverup criminal misconduct by their
employees. The law requires, and law enforcement expects, that all
companies will abide by the law, all regulatory requirements, and the
highest standards of corporate citizenship."
If convicted on the criminal charges filed today, DAIWA faces maximum
fines under the federal Sentencing Guidelines exceeding $1 billion.
The Federal Reserve Board, the New York State Banking Department, and
the Federal Deposit Insurance Corporation will be announcing today that
they have taken remedial action against DAIWA and the Daiwa Bank Trust
Company, a United States subsidiary of DAIWA, requiring the termination
of the bank's operations in the United States by February 2, 1996.
DAIWA is a Japanese bank headquartered in Osaka, Japan. DAIWA is one of
Japan's largest commercial banks and maintains branches around the
world, including offices in New York and 10 other states in the United
States. The DAIWA BANK TRUST COMPANY is a United States subsidiary of
DAIWA, headquartered in Manhattan. DAIWA's office in New York is located
at 666 Fifth Avenue.
Also this afternoon, a criminal complaint was filed charging MASAHIRO
TSUDA, a former General Manager of DAIWA's New York Branch, with one
count of conspiracy to deceive the Federal Reserve Board by concealing
the $1.1 billion loss, making false statements to the Federal Reserve
Board and making false entries in the books and records of DAIWA; and
one count of misprision of a felony. TSUDA will be presented later on
the complaint before United States Magistrate NINA GERSHON.
Ms. WHITE praised the efforts of the Federal Bureau of Investigation for
their extraordinary efforts in conducting the investigation of this
matter. She also said that the investigation of DAIWA, The Daiwa Bank
Trust Company, and individuals who are or were employed by DAIWA is
Assistant United States Attorneys REID M. FIGEL, Chief of the Securities
and Commodities Task Force, ANDREA LIKWORNIK, and MICHAEL SIMONS are
handling the prosecution.
The charges contained in the Indictment are merely accusations and the
defendant is presumed innocent unless and until proven guilty.
Approved: /s/MICHAEL A. SIMONS, ANDREA M. LIRWORNIR
Assistant United States Attorneys
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