SBI’s EVP Working in Bed at His Office

Instructing Subordinates from Bed, while SESC Eyes on SBI

January 20, 2014

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After we published the issue of last month, a couple of sources in financial world contacted us. One of them even requested a face-to-face meeting. They delivered one common message: “Please be considerate and be quiet on SBI”. In the article, we reported that SBI top-brass falling with illness, such as mentally-distressed Yasutaro Sawada, Kitao’s loyal lieutenant, then working as the president of SBI Securities, and Taro Izuchi, the executive vice president of SBI Holdings who is deeply ill and having difficulty to show up in the office.

Distressed with Dressing

The remark of “be quiet on SBI” apparently sounds like related to Izuchi. We sense an existence of a person behind. That is nobody other than Yoshitaka Kitao, who would not want further to depress the morale of the company. Any company is made by human beings, and the status of the company tends to reflect their morale, notably that of the key personnel. Kitao’s deeds affected negatively on his lieutenants, it seems. The intention of FACTA’s consecutive articles on SBI has been clear, only on one point, to criticize its murky management of profit-generating dressing. It has been like painting a black crow with white paints, and the white paints would finally falls apart, with lieutenants involved mired with illness, as in the case of Sawada and Izuchi. A few of SBI-related persons witnessed that emaciated Izuchi, lying on a bed in his office, dispatching instructions to his subordinates. Absolute rest is necessary, as his illness is harsh requiring hospitalization, our source says. Why Izuchi still works?

Izuchi is Kitao’s true sidekick and is one of Kitao’s several subordinates who emigrated from Nomura to Softbank. Izuchi graduated from Kyoto University Economics Department in 1979 with top academic records, and joined Nomura Securities. Nomura groomed him as a core officer, and let him experience assistant job of top management, and he left Nomura as general manager, and joined Kitao. Kitao’s handpicked Nomura boys left SBI one by one, but Izuchi remained there. “Nomura in those days had full of talents with unique and strong characters, among them he was kind of well-balanced person”, a Nomura old boy describes Izuchi. Yet at SBI, Izuchi did not oppose Kitao’s dominating leadership, and could not curb his too-ambitious desire which caused bad investments. As a result, he ended up helping Kitao to cook the book. The work on creative accounting took a toll on his health, with his smoking habit must have accelerated. Izuchi lying on a bed on his office sounds like he is a devout corporate warrior. But why he devotes himself like that? We would think he is required desperately. A person well aware of situations at SBI says it needs delicate accounting gimmicks, and the whole structure may break down in one tremor. Izuchi is the only person who can handle such a situation. How about an idea of the number 3, Takashi Nakagawa, the senior managing director to replace Izuchi? He follows what was instructed, but impossible to manage complicated deals.

SESC Challenging Again

Cooking books while laying on a bed…extraordinary indeed, and what is the deal he needs to tackle? “We know SBI is gray very close to black, but we need evidence, and we take into account of the fact that SBI Securities has 2 million accounts”. This is a remark of key personnel of the Securities and Exchange Surveillance Commission (“SESC”). He might have implied that SEFC was hesitating to crack SBI despite of FACTA‘s pursuit of SBI’s murky accounting, because it abhorred to cause turmoil among SBI Securities’ customers including day traders. Yet, an apparent move looks like emerging inside the SESC. We pointed out in the past that ever since Kenichi Sado, the current commissioner formerly known as a tough cop at the Tokyo Prosecutors Office, was appointed, the SEFC has behaved more like special prosecutors. However, the mainstay section of the SESC, “Special Research Section”, which deals with fraudulent accountings, has been in funk. The staffs there are consisted of tax experts at tax authority, or accounting professionals. Commissioner Sado has been very keen to revitalize this malfunctioning section by changing personnel, or inviting fresh and more aggressive prosecutor from his alma mater, the prosecutors’ office.

Indeed, it looks like the “Disclosure Research Section”, which is supposed to crack open fraudulent accountings started to investigate SBI. It will focus on SBI Ala Promo (Now called “SBI Pharma”), which increased SBI’s market capitalization by raising valuation of its stock from 50,000 yen to 1,028,750 yen per share. We are convinced that is very appropriate case for the special research section to restart a criminal investigation.