Nomura offices raided over racketeering

Japanese prosecutors yesterday raided the Tokyo headquarters of Nomura, the country's biggest brokerage, as an investigation into payments to a client linked to racketeers widened.

The highly public raids, preceded by tip-offs to the media that they were imminent, appeared to signal that the action against Nomura could become a showcase as Japan seeks to clean up business practices and deregulate its economy.

In a bizarre scene officials in business suits, led by a man with a briefcase, marched military-style through the front doors of Nomura's head office.

They firmly locked the doors, shutting out journalists gathered for a raid designed to have maximum publicity value.

The late afternoon swoop was carried out by prosecutors and officials of the nation's securities watchdog, the Securities and Exchange Surveillance Commission (SESC). Coinciding with the headquarters raid, 90 more officials swooped on 10 other locations and for the first time spelled out the suspicions in detail.

Deputy chief prosecutor Kunihiro Matsuo said the raids were to investigate a Nomura director's illegal payment of 38m ($309,000) to a company run by a relative of a racketeer to avoid disruption of a Nomura annual meeting. Mr Matsuo said the other raids included searches of the homes of the racketeer - or "sokaiya" - and the Nomura director involved, Shimpei Matsuki.

The scandal surfaced on 6 March. Mr Matsuki and fellow director Nobutaka Fujikura resigned four days later after internal inquiries found they made discretionary deals banned under Japanese law and funnelled profits to a front company for the racketeer.

Sokaiya, often linked to "yakuza" crime syndicates, extort money by threatening to expose dubious business practices or to disturb shareholders' meetings - "sokai" in Japanese.

Nomura president Hideo Sakamaki stepped down on 14 March to atone for the scandal. He became an adviser to the company, and chairman Masashi Suzuki took over his position while retaining the chairmanship.

Nomura, one of the world's most powerful financial institutions, exerts a powerful influence on the yen bond market and is also Japan's top foreign bond seller.

The company has seen key foreign and domestic clients suspend business with it since the scandal broke. Reports of the raids lowered Nomura's share price 20 (16 cents) at 1,440 ($11.70).