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United States Attorney
Southern District of New York

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 crimes.

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 continuing.

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.


Assistant United States Attorneys

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