Japan's Daio Paper says it will buy its founding family's shareholdings in the company's subsidiaries; former Chairman Mototaka Ikawa rearrested, charged with aggravated breach of trust for causing 2.33B yen in damages

LOS ANGELES , December 14, 2011 () – Daio Paper Corp. plans to buy its founding family’s shareholdings in its subsidiaries to avert another situation in which a family member exerts undue influence, the company said on Wednesday, reported The Mainichi Daily News on Dec. 14.

A day earlier, the company’s former chairman, Mototaka Ikawa, the grandson of the papermaker’s founder, was rearrested and charged with aggravated breach of trust for causing 2.33 billion yen (US$29.8 million) in damages to three Daio Paper subsidiaries.

Tokyo prosecutors who indicted Ikawa on Tuesday levied the additional charge related to his borrowing 3.2 billion yen from four group companies.

Ikawa was initially arrested last month, after Daio Paper filed criminal charges for his causing 8.58 billion yen in damages related to his borrowing a total of 10.68 billion yen. Ikawa had repaid 2.1 billion yen of the money, The Mainichi Daily News reported.

Daio Paper’s own research found that Ikawa had seven affiliated companies transfer the 10.68 billion yen to various bank accounts between May 2010 and September 2011.

The most recent charge relates to money transfers from three of those companies, on eight occasions, between March and September of this year, resulting in losses to the company, said the Tokyo District Public Prosecutors Office, reported The Mainichi Daily News.

In filing its belated financial report for the six-month period of April through September, Daio Paper reported a group net loss of 2.84 billion yen, due largely to the 4.47 billion yen extraordinary loss from the money that Ikawa loaned.

Wednesday’s fiscal first-half financial filing meets the company’s deadline to avoid being delisted from the Tokyo Stock Exchange. The TSE said it decided to keep Daio Paper listed and will remove it from stocks designated for supervision confirmation, The Mainichi Daily News reported.

Members of Daio Paper’s founding family have held majority shareholdings in subsidiaries while serving as their presidents, while the parent company has only a majority stake in three of Daio Paper’s 35 units in Japan.

The company plans to buy the founding family’s shareholdings in 32 of the 35 units, Daio Paper sources said. In a statement, the company said it is in negotiations with founding family members to buy up to 50% of the shares in group companies, The Mainichi Daily News reported.

The primary source of this article is The Mainichi Daily News, Tokyo, Japan, on Dec. 14, 2011.

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