Powerful Politician Linked To Tokyo's Stock Scandal

New York Times/August 1, 1991
By James Sterngold

Tokyo -- An important political link to Japan's stock market. scandal was disclosed today in reports that the family of one of Japan's most powerful politicians was among the influential clients who received improper compensation for stock market losses from securities houses. Okasan Securities confirmed reports today that it paid 21 million yen, or about $150,000, to a company controlled by the family of Shin Kanemaru, a powerful member of the ruling Liberal Democratic Party and a former Deputy Prime Minister. The improper compensation for market losses was paid to Oruto, a building rental company then headed by Shingo Kanemaru, Mr. Kanemmru's son, who left to work for his father last year as one of his political aides. improper Payments Japan's top brokerage houses have disclosed this week that they made more than $1 billion in improper payments to some of Japan's top industrial groups, banks and public pension funds.

The disclosures have created an uproar because they have confirmed longstanding suspicions that brokerage houses here show favoritism toward influential clients. There has also been speculation that politicians, who regularly use the stock market to raise campaign funds and frequently operate through the accounts of family members or aides, must have benefited from the payments.The first apparent evidence of this came Wednesday with the disclosure that the Soka Gakkai, the country's largest Buddhist organization, received more than $3 million in improper payments. The Soka Gakkai is affiliated with the Komeito, or Clean Government Party, a leading opposition group. The group has said the money was intended to compensate it for losses from unauthorized trading in its account.

The brokerage house, Kokusai Securities, denied that there had been unauthorized trades. Okasan Securities today confirmed the payments to Mr., Kanemaru's company, but refused to say specifically if they had been made to Mr. Kanernaru's son. Mr. Kanemaru's office refused to comment, but Japanese newspapers quoted him as having said that he had heard about the payments on Wednesday night and that they had come as "a big surprise to me." "My wife said that she did not demand it or recognize it as compensation," he was quoted as saying. "But it was my wife's action, and I am asking my aides to investigate." His wife, Etsuko, became a director of Oruto after his son left. Mr. Konemaru said, however, that he still backed a thorough investigation of the widespread pattern of discriminatory payments. Parliamentary hearings are expected to begin Friday, and the scandal is expected to be one of the top issues at an extraordinary session of the Japanese Parliament later this month.

A Sensitive Time

The disclosures about Mr. Kane-maru and the Soka Gakkai come at a particularly sensitive time. The ruling party was stung last week by charges that it was not seeking to get to the bottom of the affair and perhaps was even working to conceal details of who was compensated. The party put the securities industry under intense pressure to disclose the list of recipients. That was done, bringing hopes the scandal would die dawn. But the emergence of political beneficiaries and suspicions about the completeness of the disclosures have fed renewed public outrage.