- The Washington Times - Thursday, June 16, 2005

TOKYO (AP) — Resort and railroad kingpin Yoshiaki Tsutsumi pleaded guilty to charges of insider trading and falsifying records yesterday at the opening of his trial widely seen as a symbol of the growing pressures toward transparency and social responsibility in corporate Japan.

Once ranked the world’s richest man by Forbes magazine, Tsutsumi, formerly head of Seibu Railway Co. and the Japanese Olympic Committee, has taken a dramatic fall from grace and power that is riveting Japan.

His high-profile trial in Tokyo District Court also highlights the gradual shift away from old-style insular management as Japan increasingly globalizes and attracts foreign investment. Japanese companies have long been characterized by an Old Boy’s network that brushed off investors and consumers.

“The Seibu case is finally bringing to light the long-standing relations between shareholders and the company that defied modern standards,” said Masayuki Deguchi, who heads the International Society for Third Sector Research, a Baltimore-based group that promotes research in philanthropy. “But such Japanese ways are no longer going to be tolerated in the world.”

The bespectacled Tsutsumi, 71, entered the courthouse somberly, wearing a dark business suit. A court official confirmed that the session ended after about two hours and that Tsutsumi pleaded guilty to the charges.

Tsutsumi apologized for what he had done and acknowledged he had hurt shareholders, the quasi-public NHK TV reported.

“There is no mistake” to the charges, he was quoted as saying.

Over the decades of Japan’s modernization after World War II, Tsutsumi developed a reputation for ruling over his empire of a hotel chain, ski resorts, golf courses and professional baseball team, the Seibu Lions, with an iron hand. Press reports likened him to a godlike figure.

In an apparent show of corporate loyalty, a team of two Seibu employees was assigned until last year to take turns every night staying at the sprawling grave site of Tsutsumi’s father near Tokyo and ring a giant bell at 6 a.m.

Earlier this year, the former president of Seibu Railway, one of the executives questioned in the criminal investigation by prosecutors, hanged himself at home, apparently to avoid squealing on his boss. Last year, another executive committed suicide amid a related investigation by Japan’s financial watchdog.

Tsutsumi also won respect as a charismatic billionaire with tremendous influence in Japan’s political circles and sports.

A good skier, he is credited with being instrumental in winning the 1998 Nagano Winter Olympics. Skeptics say his hotels and ski slopes were the big beneficiaries of public projects such as railways and roads that accompanied the games.

But since his arrest in March, the Japanese press has portrayed him as a disgraced figure of the past whose rise to glory was based on methods that are no longer relevant to rapidly globalizing Japan.

Prosecutors said Tsutsumi conspired with several executives to falsify Seibu Railway’s 2003 financial statement, putting the stake of Kokudo Corp., his privately owned company, in the railway far lower than actual numbers. Having a few top executives owning too much was a violation of Tokyo Stock Exchange rules. Seibu has acknowledged the deception, and the stock was delisted in December.

If convicted, Tsutsumi faces up to five years in prison and a fine of up to $46,000 for falsifying financial statements, or up to three years in prison and a fine of up to $27,000 for insider trading.

Besides the Seibu case, Japan is periodically shaken by corporate scandals that raise serious questions about management ethics, such as chronic bid-rigging, cover-ups of financial data and auto defects as well as paying off gangster racketeers rather than face embarrassing questions at stockholders meetings.

“Unless the system changes, the arrests and problems will continue,” Hitotsubashi University professor of management Kanji Tanimoto said. “Although there is more interest in talking about corporate social responsibility, change won’t come easily because the consumer’s voice is undeveloped.”

Tsutsumi was given the title of world’s richest man by Forbes magazine in the late 1980s. Crashing land prices in early 1990s toppled him from that rank, but he still is estimated to be worth $3 billion.


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