Former Deutsche Bank AG (DBK) salesman Shigeru Echigo admitted to bribery charges in Tokyo and said he acted on instructions from his managers, as authorities push brokerages to be more judicious in entertaining clients.
At the start of his trial in the Tokyo District Court today, Echigo accepted prosecutors’ argument that he bribed a pension fund executive to buy investment products. Echigo, 37, spent about 900,000 yen ($8,800) entertaining the client on 15 occasions from April to September 2012, the prosecutors said.
The defendant said he didn’t act alone and the conduct at the German bank’s Japan brokerage unit was institutional. Former Mitsui & Co. (8031) employee Yutaka Tsurisawa was convicted in the same court last month for accepting benefits from Echigo, and Deutsche Securities Inc. cut the pay of several top Japan officials after the firm was censured by regulators in December.
The charges relate to meals and golf outings with Tsurisawa that constituted a breach of Japanese law because the money his pension oversaw included public funds, effectively making him a civil servant. The investigations into Echigo and Tsurisawa may signal that Japanese banks’ and brokers’ practice of entertaining clients to build relationships will only be tolerated in relation to private money.
“This case has sent a strong message that banks and brokerages must be more careful when they entertain clients,” said Mamoru Nagano, a professor of economics and international finance at Seikei University in Tokyo. “Authorities globally have been tightening up oversight of the banking industry since the financial crisis to make sure that transactions comply with the law.”
If convicted by a panel led by Chief Judge Akira Ando, Echigo faces as long as three years in prison or a maximum fine of 2.5 million yen. The trial was adjourned after this morning’s proceedings and the next hearing is scheduled for June 17.
“My actions as a salesman were part of systematic conduct based on the instructions and consent of my bosses at Deutsche Securities,” Echigo, wearing glasses and a dark blue, pinstriped suit, told the court. His lawyers showed evidence based on police and prosecutors’ interviews with his former bosses and colleagues that managers encouraged the spending.
Takayuki Inoue, a Tokyo-based spokesman for Deutsche Securities, declined to comment.
Tsurisawa was convicted by Ando on March 14 and given a suspended 18-month prison sentence. The executive was told to repay almost 900,000 yen, according to the court, equivalent to the amount spent on his entertainment.
Deutsche Securities last year became the first brokerage to be penalized in Japan for breaching client entertainment rules after spending 6.3 million yen on executives from three pension funds between 2010 and 2012. The Financial Services Agency ordered compliance improvements in December, and the unit of Germany’s largest bank disbanded the pension sales team.
Japanese authorities have been beefing up oversight of the pension fund industry since regulators found in 2012 that executives at AIJ Investment Advisors Co. covered up losses of retirement money they managed. The civil service was rocked by a series of wining-and-dining scandals involving Finance Ministry and Bank of Japan officials in the late 1990s.
Echigo’s entertainment of Tsurisawa included meals at restaurants such as Sushi-Ten and barbecue specialist Jojoen in Tokyo’s Nishi-Azabu district and visits to nightclubs in the Roppongi area, a person with knowledge of the matter said, asking not to be named because the matter is confidential.
Members of the now-defunct pension solution sales department at Deutsche Securities had manipulated receipts to hide that they were for welfare pension fund executives, an official from the Securities and Exchange Surveillance Commission said at a briefing on Dec. 5, asking not to be named in accordance with its policy.
Echigo joined Deutsche Securities in 2010 and left the firm early this year. He entertained Tsurisawa in return for buying 1 billion yen of investment products for trading company Mitsui’s retirement fund, and to procure future business, prosecutors said today.
Deutsche Securities Chief Executive Officer Makoto Kuwahara was given a 20 percent pay cut for six months, the bank said in a statement Dec. 12. Chief Operating Officer Bret Dandoy and Chairman Norimichi Kanari were each given a 30 percent pay reduction for the same period.
The case is 2967/Wa/2013, Tokyo District Court.
To contact the reporter on this story: Takahiko Hyuga in Tokyo at firstname.lastname@example.org