How any trader could have accumulated losses over such a timespan without his masters at the bank noticing was a puzzle to most on Wall Street yesterday. "It's simply unbelievable", commented one long-time trader. "How did the bank not see this? It's like not noticing there is an elephant in your living room".
An employee of Daiwa's New York branch since 1976, Mr Iguchi was an executive vice-president in charge of bond trading and settlements. He is accused of making unauthorised transactions to conceal losses in his bond-trading account.
Though not among the Goliaths of the bond-trading world in New York, Mr Iguchi was well known to some as a maverick operator who would often take risks. "People who talked about him always said he was a bit of a loose cannon", another trader confirmed. "A lot of his colleagues are surprised he did not blow up a lot earlier".
A resident of one of the posher New Jersey suburbs of New York, Mr Iguchi was a native of Kobe, near Osaka, in Japan. But he came to the United States in the early Seventies and studied psychology at Southwest Missouri State University, although they could not trace any record of him yesterday. He worked as a car salesman for two years before joining Daiwa in 1976.
He was highly rated by his superiors and quickly earned a reputation as a hot-shot in the trading of US government bonds. As soon as 1979, he had been given responsibility for both trading and backroom settlement operations in New York.
In 1986, 10 years after he joined Daiwa, he was made head of its government bond-trading operation in New York, one of the bank's most prestigious and profitable departments.
But, by then, according to Daiwa president, Akira Fujita, Mr Iguchi had already been hiding his own bond-trading losses for two years, sowing the seeds of the disaster.
At a news conference held at Daiwa's Osaka headquarters yesterday, Mr Fujita said: "Mr Iguchi seemed very good at what he did, and I heard that he was well-respected by the bond market. We valued him highly."
Mr Fujita added:"We entrusted him with everything. We really evaluated him too highly." Daiwa said it had dispatched a team of 30 of its own investigators to look into the circumstances of the scandal.
The New York branch's general manager, Masahiro Tsuda, meanwhile, voiced his own chagrin at what has been uncovered. "We are deeply embarrassed that our internal controls and procedures were not sufficient to prevent this fraudulent action," he said in a brief statement. Asked how it was possible to hide such huge losses for so long, Daiwa Bank senior managing director, Kazuya Sunahara, told the Osaka news conference: "We're not exactly sure how he did it, but he might have been using duplicate order forms."
According to the bank's vice-president, Kenji Yasui, Mr Iguchi had been dismissed on Monday.
While Daiwa has ample resources to sustain the loss, its standing in New York and worldwide is certain to be tarnished. "It's going to hurt their reputation in this country," remarked Perrin Long, an analyst at Brown Brothers Harriman, a New York securities firm. "It is going to make things difficult for them. I'm sure the bosses in Tokyo are going to wake up and wonder how the hell this happened in New York."
Mr Iguchi, whom the government hopes to keep in detention pending trial, finally owned up to his employers in a letter to the bank president in Tokyo on 13 July. Daiwa subsequently informed the US Federal Reserve Bank of its problem, which in turn passed the information on to to the FBI and the District Attorney's office last Wednesday.
The FBI yesterday promised a lengthy investigation into Mr Iguchi's activities in the office. A spokesman indicated that each of the 30,000 fraudulent transactions that Mr Iguchi allegedly committed would be scrutinised by agents.Reuse content