Scandal-ridden Nomura says 'sayonara' to its entire board

The president of the scandal-ridden Japanese securities house, Nomura, resigned yesterday along with the rest of the 16-strong board in the most dramatic and sweeping clearout ever witnessed by Japan's financial community.

Masashi Suzuki, who only took up the post a month ago following the forced departure of his predecessor, said he too had to accept responsibility for the racketeering scandal that has wrecked the reputation of Japan's biggest securities firm. "Nomura is experiencing the worst crisis since it was founded," Mr Suzuki said darkly as he announced his resignation.

The scandal broke two months ago after it emerged that Nomura had been paying sums into accounts linked with a racketeering organisation, collectively known as sokaiya, to avoid its annual shareholders' meeting being disrupted.

Yesterday Nomura's former president disclosed that it had paid more than 70m in stocks into accounts linked with the racketeer. Testifying before a committee of Japan's Upper House of Parliament, Hideo Sakamaki, who stepped down last month, said invesigators had discovered five irregular stock deals through which the money was routed, one of which involved the transfer of shares in a commercial bank.

Meanwhile, there were Japanese press reports yesterday that the Ministry of Finance will suspend some of Nomura's operations, including the ability to deal in shares on its own account, for three months as punishment. The developing scandal has already prompted the defection of some of Nomura's clients, robbing it of large broking fees and further tarnishing its reputation.

The 15 board members who stepped down yesterday alongside Mr Suzuki included five executive vice-presidents and four senior managing directors. Two directors have already been dismissed for their involvement in the payoffs.

Speaking at a news conference, Mr Suzuki said he had hoped to take Nomura's management into the next generation after regaining public trust. But he said the current situation was so serious that more sweeping action was needed, hence his resignation.

The firm's new president will be Junichi Ujiie, a managing director of Nomura who holds a doctorate in economics from the University of Chicago and ran the firm's New York-based Nomura Securities International from 1992 until 1996. He said his task would be to reshape the culture of Nomura. "It is important to establish a management system which is transparent and facilitates open discussion," he said. Mr Ujiie added that there was an atmosphere within the firm that discouraged managers from talking freely.

Ties between Japanese companies and sokaiya have long been a problem but Nomura has become the most spectacular victim of links with racketeers.

Nomura employs 11,000 staff around the world and is Japan's biggest brokerage, dominating both share and bond trading. It has its foundation in a Osaka money changing shop set up in 1872 by Tokushichi Nomura whose son grew the business and incorporated it as a bank in 1925.