Police arrest Incubator Bank's ex-chairman Kimura, others+

TOKYO, July 14 Kyodo -
Tokyo police arrested Takeshi Kimura, former chairman of the Incubator Bank of
Japan and former adviser to the Financial Services Agency, together with
President Tatsuya Nishino and three others Wednesday on suspicion of
obstructing an FSA audit of the bank last year.
Meanwhile, the Tokyo-based bank said it has appointed novelist and outside
director Go Egami, 56, as its new president to replace Nishino, effective the
same day.
Kimura, 48, has denied hindering the inspection in violation of the Banking
Act, while the 54-year-old president and others have admitted to the
allegation, said the Metropolitan Police Department, which served the warrants
after questioning the suspects.
A former Bank of Japan official, Kimura was involved when Incubator Bank was
set up in 2004 and became its chairman in January 2005. He stepped down in May
after the bank reported a 5.1 billion yen net loss in the year ended March.
The three others are senior executive Hiroyuki Yamaguchi, 48, executive Katsuya
Watanabe, 43, and former executive Nobuhiro Sekimoto, 38.
Kimura, who made his name as a key adviser to former financial services
minister Heizo Takenaka when he served in the government of Prime Minister
Junichiro Koizumi, is believed to have told other executives to systematically
delete business e-mails around the time of the audit.
The police are trying to uncover the whole picture of dubious business dealings
involving the bank, which specializes in loans to small and midsize companies,
as they also view transactions among its borrowers within a network of more
than 100 firms set up by Kimura as shady.
Kimura denied involvement in an interview with Kyodo News, saying, ''There are
no facts supporting the idea that I instructed the executives to hinder the
audit.''
Incubator Bank said Wednesday it will consider measures against the arrested
executives and that it is willing to fully cooperate with the investigation and
do its utmost to improve its operations.
The five are suspected of deleting about 280 e-mails from the bank's computer
servers in a bid to prevent the financial industry watchdog from learning about
its business and financial conditions in the audit from June last year to this
March, and offering false explanations about the lack of e-mails to FSA
inspectors.
Kimura allegedly instructed other executives to delete the e-mails at an
internal meeting, the police said.
The e-mails reportedly contained details of the bank's loan claims transactions
with collapsed moneylender SFCG Co., in which it allegedly charged illegally
high interest rates of effectively 45.7 percent, as well as the details of
deals among borrowers.
The FSA ordered Incubator Bank on May 27 to suspend some of its operations from
June 7 through Sept. 30 due to its obstruction of the audit and a ''serious
violation of law'' regarding its dealings with SFCG, which went under in
February last year.
On June 11, the police raided the bank's main office and other related
locations, including the office of Kimura's current Tokyo-based business, on a
charge of violating the Banking Act.
Meanwhile, Incubator Bank sources said Wednesday that a core member company of
the Incubator Network for Small and Midsize Enterprises, established by Kimura,
had purchased equipment at high prices from collapsed borrowers of loans from
the bank so they could use the funds for loan repayments.
The practice was designed to ''conceal bad loans and make the bank's financial
standing appear better,'' one of the sources said.
==Kyodo