The American investment bank Lehman Brothers is to sue Japan's fifth largest trading firm, Marubeni, over an alleged $350m (£176m) fraud involving two of the company's employees.
The alleged fraud relates to a loan which Lehman Brothers gave to Asclepius, a subsidiary of the quoted Japanese biotechnology company LTT Bio-Pharma. The loan was secured by certificates from Marubeni, one of Japan's general trading companies, which trades in everything from chemicals to food to energy. Two weeks ago, Asclepius filed for bankruptcy, leaving its creditors – including Lehman Brothers – out of pocket.
Lehman is now claiming that as Marubeni secured the loan, it should now repay it. However, the Japanese company claims that the seals on the certificates granted by its employees were forged, insisting that the loans were not in fact approved by Marubeni. Furthermore, it claims that the two individuals who allegedly forged the certificates were merely contractors, not directly employed by Marubeni.
"We have nothing to do with the fraudulent acts, and we have no obligation to cover any repayment requests," Marubeni said in a statement.
Marubeni fired the two employees three weeks ago, and claimed that they may have been manipulated by a former director at Asclepius. It has referred the case to the Japanese police, and claims that it too has been a victim of the alleged fraud.
At the weekend, however, Lehman Brothers said it remained confident of succeeding in its legal claim against Marubeni. In a statement, the US bank said: "Lehman Brothers Japan today confirmed that it has been working closely with the authorities on a fraud it uncovered that was perpetrated by employees at Marubeni, a large trading company in Japan, at the company's offices. The fraud by these employees is believed to have been perpetrated against several financial institutions and other parties, including LehmanBrothers.
"After Lehman Brothers became aware of the fraud involving Marubeni employees, it informed the appropriate authorities. Lehman Brothers is confident that it undertook all the appropriate measures on the transaction and is commencing legal action against Marubeni Corporation to seek full recovery of funds it believes to have been fraudulently misappropriated from transactions in which an affiliate provided financing. The firm is confident in its legal case and fully expects its funds to be repaid."
Lehman Brothers is expected to file its suit in the Tokyo court as early as today.
Elsewhere, US regulators have begun investigating whether traders spread false rumours about the financial security of Lehman Brothers after the near-collapse and rescue of Bear Sterns this month. Shares in Lehman Brothers have fallen by more than a quarter in March, amid market speculation that it may become the next corporate casualty of the credit crunch. On one day in mid-March, the stock almost halved, prompting the bank to issue a statement reassuring the market. It recouped most of its losses the next day.
The investigation by the US Securities & Exchange Commission is similar to the recent inquiry begun by the UK's Financial Services Authority into rumours regarding HBOS. Shares in the UK bank fell 17 per cent in 15 minutes earlier this month, after similar rumours about the company's stability ripped through the market. The directors of the bank restored confidence by buying large quantities of the stock to demonstrate their confidence in the group.Reuse content