Friday, October 22, 2004
Seibu scandal shakes Japan
Mariko Sanchanta / Tokyo October 22, 2004
Japan's best-known brands have been dragged into the spotlight for their connection with a burgeoning scandal involving Seibu Railway and its parent company Kokudo, which are under investigation for suspected insider trading.
Last week, it emerged that Seibu Railway had falsified shareholder information in its financial reports for the past five years. For example, Seibu reported in March its major shareholders held all together 63.7 per cent of its stake, while their actual combined holding was 88.6 per cent.
Under Tokyo Stock Exchange (TSE) regulations, a listed company cannot be more than 80 per cent owned by its top 10 shareholders.
After Kokudo became aware of this, it privately approached a number of companies it had long-standing business ties with and urged them to buy Seibu Railway's shares, in a bid to decrease its own stake so that Seibu Railway could remain listed.
The companies that bought shares of Seibu Railways include many of Japan's most well-known firms: Kirin Beverage, Suntory, Shiseido, Hitachi, Mitsubishi Electric, Dentsu, Oji Paper, Sumitomo Metal, Sapporo Holdings, among others.
Shiseido, Japan's leading cosmetics company, confirmed today it had purchased 430,000 shares of Seibu Railway for about ¥500 million at the end of September, after it was approached by Kokudo. Shiseido said it had bought the shares due to its "long-term business relationship" with Kokudo.
Kokudo owns the Prince Hotel chain, where bathrooms are stocked with Shiseido toiletries.
Kirin Beverage and Kirin Brewery also confirmed today they had bought a combined 2 million shares of Seibu worth ¥2 billion at the end of September. The Kirin group is a beverage supplier for the Prince Hotel chain.
The first Prince Hotel opened in Japan in 1964, and the chain currently has 64 hotels domestically and overseas. Shiseido and Kirin said they would wait and see what action the Japanese Securities and Exchange Surveillance Commission would take against Kokudo, before deciding if legal action against the firm was necessary.
Shares of Seibu Railway have plummeted over the past week, shedding more than 50 per cent. They closed down 6.8 per cent to ¥511 today. The TSE is currently evaluating whether the company should be delisted.
Yoshiaki Tsutsumi, the Japanese business tycoon who was once listed as the world's wealthiest individual by Forbes magazine in the early 1990s, last week resigned from all executive positions he held within his sprawling empire, including chairman of Kokudo and Prince Hotels.
Tsutsumi stepped down as chairman of Seibu Railway in April, after it emerged the company had made illegal payments to sokaiya, or corporate racketeers.
That incident was the catalyst that prompted further investigation into the company's books by authorities.