Yamaichi Securities
Encyclopedia
was a Japan
ese securities trading firm. The company announced it would cease operations on November 24, 1997 and was declared bankrupt by the Tokyo District Court
on June 2, 1999.
In the boom of the 1980s it was given specified sums of money by 10 of its clients to invest as it saw fit. A sharp downturn in the early 1990s and poor dealings by Yamaichi generated losses of more than 200 billion yen. Fearing the demise of the firm through loss of reputation that would result if the scale of losses became known, the brokerage shouldered the loss of its clients, and moved it off balance sheet.
, setting up a separate company called Yamaichi Enterprise which opened an account at the Tokyo
branch of Credit Suisse
. Depositing ¥
200 billion in Japanese government bonds, the Yamaichi subsidiary
then used the dummy companies to generate profits for clients while eventually absorbing losses of ¥158.3 billion. A separate scheme using foreign currency
bonds
resulted in losses of ¥106.5 billion being hidden in Yamaichi's Australian subsidiary.
Tsugio Yukihira, chairman of the brokerage at the time of its collapse, acknowledged in front of a Japanese Diet hearing that the activities were illegal. He said that only three people at the brokerage, namely himself former President Atsuo Miki and another individual, knew about the arrangements; he declined to name the 10 firms involved in the illegal trading. The company announced it would cease operations on November 24, 1997 and was declared bankrupt by the Tokyo District Court
on June 2, 1999.
The company's last president, Shohei Nozawa made a tearful public apology on Japanese television. Japan's Minister of Finance announced that steps would be taken to ensure the event would not further destabilize the frail Japanese banking system and economy as a whole. On June 1, 2001, the company's last chairman, Tsugio Yukihira, settled a lawsuit filed in Tokyo District Court. Suitors alleged his window-dressing tobashi schemes and illegal dealings had undermined the brokerage and led to its demise.
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
ese securities trading firm. The company announced it would cease operations on November 24, 1997 and was declared bankrupt by the Tokyo District Court
Tokyo District Court
is a district court located at 1-1-4 Kasumigaseki, Chiyoda, Tokyo, Japan. -References:...
on June 2, 1999.
History
Yamaichi, formed in the late 1800s, was at one time one of the four major Japanese brokerages. Its clients were major Japanese corporations.In the boom of the 1980s it was given specified sums of money by 10 of its clients to invest as it saw fit. A sharp downturn in the early 1990s and poor dealings by Yamaichi generated losses of more than 200 billion yen. Fearing the demise of the firm through loss of reputation that would result if the scale of losses became known, the brokerage shouldered the loss of its clients, and moved it off balance sheet.
Tobashi and collapse
In January 1992, Yamaichi executives resorted to such a tobashi schemeTobashi scheme
A Tobashi scheme is a financial fraud where a client's losses are hidden by an investment firm by shifting them between the portfolios of other clients. Any real client with portfolio losses can therefore have their accounts flattered by this process. This cycling cannot continue indefinitely and...
, setting up a separate company called Yamaichi Enterprise which opened an account at the Tokyo
Tokyo
, ; officially , is one of the 47 prefectures of Japan. Tokyo is the capital of Japan, the center of the Greater Tokyo Area, and the largest metropolitan area of Japan. It is the seat of the Japanese government and the Imperial Palace, and the home of the Japanese Imperial Family...
branch of Credit Suisse
Credit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
. Depositing ¥
¥
¥ is a currency sign used by the Japanese yen and the Chinese yuan currencies. The symbol resembles a Latin letter Y with a double stroke. The base unit of both currencies shared the same Chinese character pronounced yuán in Mandarin Chinese and en in Standard Japanese...
200 billion in Japanese government bonds, the Yamaichi subsidiary
Subsidiary
A subsidiary company, subsidiary, or daughter company is a company that is completely or partly owned and wholly controlled by another company that owns more than half of the subsidiary's stock. The subsidiary can be a company, corporation, or limited liability company. In some cases it is a...
then used the dummy companies to generate profits for clients while eventually absorbing losses of ¥158.3 billion. A separate scheme using foreign currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
resulted in losses of ¥106.5 billion being hidden in Yamaichi's Australian subsidiary.
Tsugio Yukihira, chairman of the brokerage at the time of its collapse, acknowledged in front of a Japanese Diet hearing that the activities were illegal. He said that only three people at the brokerage, namely himself former President Atsuo Miki and another individual, knew about the arrangements; he declined to name the 10 firms involved in the illegal trading. The company announced it would cease operations on November 24, 1997 and was declared bankrupt by the Tokyo District Court
Tokyo District Court
is a district court located at 1-1-4 Kasumigaseki, Chiyoda, Tokyo, Japan. -References:...
on June 2, 1999.
The company's last president, Shohei Nozawa made a tearful public apology on Japanese television. Japan's Minister of Finance announced that steps would be taken to ensure the event would not further destabilize the frail Japanese banking system and economy as a whole. On June 1, 2001, the company's last chairman, Tsugio Yukihira, settled a lawsuit filed in Tokyo District Court. Suitors alleged his window-dressing tobashi schemes and illegal dealings had undermined the brokerage and led to its demise.