Probe finds Mizuho lax about cleaning up mob loans

Associated Press
A man walk by a corporate sign of Mizuho Financial Group Inc. in Tokyo, Monday, Oct. 28, 2013. Japanese bank Mizuho Financial Group was lax in cleaning up loans that the lender discovered were linked to organized crime did not deliberately cover them up, an outside panel of lawyers said Monday. (AP Photo/Koji Sasahara)
.

View gallery

TOKYO (AP) — A probe has found Japanese bank Mizuho Financial Group lax in cleaning up loans linked to organized crime, highlighting troubles with corporate governance in the world's third-largest economy.

An outside panel said Tokyo-based Mizuho, Japan's No. 2 bank by assets, failed to do what was expected in reducing and preventing mob-related loans. But it said the bank had not engaged in a deliberate cover-up.

The panel headed by Hideki Nakagome, who also led an investigation into accounting fraud at camera and medical equipment maker Olympus Corp., characterized the more than 200 million yen ($2 million) in lending as "captive loans" acquired when Mizuho bought consumer finance company Orient Corp.

Senior Mizuho executives neglected to ensure compliance with laws against dealings with organized crime after it discovered the loans in early 2011, the panel said in a report Monday. Soon after, Mizuho's management became preoccupied with ATM malfunctions triggered by an influx of donations for victims of the 2011 tsunami disaster.

The report outlined plans it said Mizuho will present to the Financial Services Agency, which has demanded that the bank "improve" its lending business.

They include ending the loans, stepping up anti-mob screening of incoming business, tighter corporate governance and improving awareness among management and other employees about the need to prevent dealings with those linked to organized crime.

Mizuho faced a Monday deadline for presenting that plan to the agency.

The bank on Friday denied news reports saying its chairman would step down and president lose months of pay as penalties meted out to some 30 Mizuho executives for failing to comply with laws against lending to "anti-social forces," a byword in Japan for criminal gangs.

The troubles at Mizuho underscore the difficulties financial companies confront in avoiding dealings with organized crime and have reinforced calls for more data sharing by police and financial institutions.

Japanese gangs, known as "yakuza," have long been involved in many areas of the economy, despite efforts to freeze them out of the financial system.

But the panel also faulted Mizuho's corporate governance, a perennial problem highlighted by a stream of scandals over negligence, fraud and other troubles in some of Japan's most elite companies.

In a governance report issued July 1, Mizuho outlined a code of conduct that abjures any influence or dealings with "anti-social elements."

The bank pledged to "oppose firmly the activities of any anti-social elements that threaten the rule of law, public order and safety" and to ensure compliance with its code of conduct.

View Comments