ROANOKE TIMES

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, November 3, 1995                   TAG: 9511030078
SECTION: BUSINESS                    PAGE: B8   EDITION: METRO 
SOURCE: BLOOMBERG BUSINESS NEWS
DATELINE: NEW YORK                                 LENGTH: Medium


U.S. BOOTS DAIWA

Daiwa Bank Ltd. has been indicted on fraud charges for hiding $1.1 billion in trading losses from regulators and ordered to stop doing business in the United States.

The Federal Reserve ordered the Japanese bank to sell or close its U.S. operations within 90 days. The banking death penalty was ordered because Daiwa ``engaged in a pattern of unsafe and unsound banking practices and violations over an extended period of time that are most serious in nature,'' said the Fed, which regulates banks operating in the country and the $3.3 trillion U.S. Treasury bond market.

The indictment charges Daiwa with conspiring to conceal Treasury market trading losses by Toshihide Iguchi, the former head government bond trader at its New York branch. Daiwa waited two months to tell U.S. regulators of Iguchi's losses after it learned of them in July.

``The message to the financial community from today's indictment should be clear and unambiguous,'' said U.S. Attorney Mary Jo White. ``Law enforcement will not tolerate financial institutions who unlawfully attempt to mislead regulatory authorities and cover up criminal misconduct by their employees.''

Officials charged Masahiro Tsuda, formerly one of the two top executives in the New York branch, in the conspiracy. Tsuda resigned from the bank last month.

``This is a case of cover-up, pure and simple,'' said James Kallstrom, director of the New York office of the FBI.

Last month, Iguchi pleaded guilty to concealing losses amassed over 11 years and said his supervisors told him to continue the cover-up after he told them about the losses in July. Daiwa announced the losses Sept. 26.

Officials at Daiwa, the world's 19th-largest bank, said they didn't tell U.S. regulators immediately because they wanted to prevent Iguchi from fleeing and needed time to investigate. The bank said it would fight the criminal charges.

``The bank was motivated by our desire to investigate thoroughly the unauthorized activities by which it was victimized, to take all necessary action to protect our customers and to act in a way that was not harmful to the international banking system,'' said Takashi Kaiho, Daiwa's new president.

The 24-count indictment accuses the bank of wire and mail fraud, falsifying records and obstructing the examination of a financial institution.

Daiwa faces fines of more than $1.3 billion. Tsuda could serve up to eight years in prison.

Regulators wanted to set an example for other foreign banks that may be falling short of U.S. banking regulations, said Neil D. Levin, New York's superintendent of banks.

Daiwa agreed to wind down its U.S. operations by Feb. 2, selling or closing its branches and its Daiwa Bank Trust Co. unit. The bank said it also would restructure its other international offices, cutting 2,600 jobs and prohibiting all offices outside Japan from trading for their own account.

Japan's Ministry of Finance is conducting its own investigation of the trading scandal.

The Fed's action to bar Daiwa from the United States was far more severe than expected, said Feliz Kaiser, a bank analyst at Moody Investors Service Inc. in New York. ``For a bank of Daiwa's size, not to be able to play in New York is a big handicap.''

U.S. regulators have been particularly quick to pounce on securities violations involving the Treasury market, the benchmark for determining interest rates around the globe. Salomon Inc. was fined $290 million for violating rules in 1991 governing auctions of Treasury securities.

The last major bank closed by the Fed was the scandal-ridden Bank of Credit and Commerce International in 1991.



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