Yamaichi board quits over racketeer links

Yamaichi Securities announced the resignation of 11 of its senior executives yesterday in the latest act of contrition by a Japanese financial institution enmeshed in the country's corporate racketeer scandal.

The company's president, Atsuo Miki, formally resigned along with the chairman, Tsugio Yukihira, and nine other board members in the wake of a scandal concerning the firm's links with a sokaiya, or corporate blackmailer. "Our firm is determined to make a clean break with the negative legacy of the past," said Yamaichi's new president, Shohei Nozawa. All of the men resigning denied personal responsibility for the scandal, which is still being investigated by prosecutors.

Police raided the homes and offices of several of the company's senior executives last month on the suspicion that Yamaichi made some 79 million yen (pounds 429,000) of illegal payments to a sokaiya named Ryuichi Koike as "compensation" for trading losses. Sokaiya extort money from companies by threatening to disrupt their annual general meetings and publicising the sexual and financial improprieties of their management.

Since a tightening up of the law in 1983 it has been technically illegal to pay them off, but the practice has remained routine among image-conscious companies.

Similar revelations involving Mr Koike have already shaken up Nomura Securities and the Dai-Ichi Bank, which last month were ordered by the Japanese Finance Ministry to close down some of their most profitable operations as a punishment. Yamaichi is the smallest of Japan's so-called Big Four brokerages, and is already hurting badly from the scandal.

According to Shoji Saotome, the new chairman, two corporations have dispensed with Yamaichi's services as an underwriter of bonds since the raid on the brokerage's offices.

Between April and June, Yamaichi posted 5.43bn yen (pounds 29m) in losses. The ongoing deregulation of Tokyo's financial markets, which allows banks to compete with brokerages, is further adding to its troubles.