Japan's Daio Paper says it will file complaint against former chairman for allegedly borrowing US$140M in company funds for personal use without permission; company's stock down 15% since media started reporting on loans
October 28, 2011
– Japan’s Daio Paper has revealed that its former chairman, Mototaka Ikawa, has borrowed US$140 million of the company’s money for his own use without permission and it intends to file a complaint against him, reported The New York Times on Oct. 28.
Ikawa, who stepped down as chairman on Sept. 16, has not publicly responded to specific charges but has admitted to borrowing some of the money and said he intended to repay it, according to public broadcaster NHK.
In a report filed with the Tokyo Stock Exchange on Oct. 28, Daio Paper said that Ikawa regularly ordered subsidiaries of the company to deposit money into his personal bank account and to an account help by the Las Vegas Sands casino’s Japanese subsidiary.
Ikawa has repaid 4.75 billon yen (US$62.7 million) of the 10.68 billion yen he borrowed between May 2010 and September 2011, according to the report. Daio Paper said it would ask Ikawa to repay the remaining amount and investigate how he used it, the Times reported.
The former chairman claims he used the money he has not repaid for currency trading and dealing in the stock market, said the report.
The report also criticized Daio Paper executives, board members and auditors who failed to bring attention to the loans previously. The former chairman’s “wishes were obeyed without question,” the report said, reported the Times.
Daio Paper has fired the former chairman’s brother Takahiro Ikawa, who is a board member, and their father, Takao Ikawa, who advised the company, is a former chairman and the son of the company’s founder Isekichi Ikawa, said Masayoshi Sako, the company’s president, at a news conference.
Sako also had his pay cut by 50%, while board members received other censures, announced the company, which is a major producer of tissue paper. A special committee is to be formed to study ways to improve Daio Paper’s corporate governance, the Times reported.
To cover the loans, some of the Tokyo-based company’s subsidiaries were forced to take on more debt, according to the report. Daio Paper had a net loss of 8 billion yen on sales of about 410 billion yen for the year to March.
Since the loans have been reported by the local media, Daio Paper’s stock price has dropped about 15%, reported the Times.
The primary source of this article is The New York Times, New York, New York, on Oct. 28, 2011.