Three ex-Nomura bosses held

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Three former senior executives of Nomura Securities were arrested yesterday by Japanese authorities over alleged pay-offs to racketeers in an escalating scandal at Japan's and the world's biggest brokerage.

Agents of the Tokyo Public Prosecutors Office also searched the trio's homes for evidence that Nomura paid 49.7m (pounds 252,000) to Ryuichi Koike, a "sokaiya" or gangster who blackmails companies by threatening to disrupt shareholders' meetings.

Two of the executives arrested were Shinpei Matsuki and Nobutaka Fujikura. Both were managing directors and, in terms of seniority, were only three steps down from the president's office.

The two men resigned in March, followed weeks later by Sakamaki - Nomura's president - and 14 other top executives. The mass resignation was unprecedented and was a sign of how seriously Nomura was taking this scandal.

The other executive arrested yesterday was Osamu Fujita, a former director in the general affairs division.

Agents from the PRosecutors Office also searched the home of Hideo Sakamaki, former president of Nomura Securities. Mr Sakamaki was not arrested.

Japan's Minister of Finance Hiroshi Mitsuzuka said the arrest of the three executives was "highly regrettable".

Mr Mitsuzuka said his ministry would handle the Nomura incident "in a strict manner" when it received a report from the Securities and Exchange Surveillance Commission (SESC). He added that he would monitor the investigation "with great interest".

The arrests came a day after the SESC asked prosecutors to file charges against Nomura and the three executives for illegally compensating Mr Koike for his trading losses.

By charging Nomura as well as the three men, the commission indicated it did not believe Nomura's claim that the executives acted on their own.

The executives face up to a year in prison and fines of up to 1m. Nomura could be fined up to 100m.

Nomura has also been hit by the decision to discontinue trading with it by several publicly owned Japanese banks and investment houses. "We obviously can't go on trading with a company that has a criminal charge against it," one said.