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Investment firm RBICO and 3 others tied to Nagano pension debacle

Shigeki Iwahashi in Hong Kong in March
Shigeki Iwahashi in Hong Kong in March

TOKYO (TR) – Nagano Prefectural Police earlier this month raided the Tokyo offices of investment firm RB Investment and Consulting (RBICO) over suspected criminal activities related to investments made within a pension fund based in Nagano City.

According to the Yomiuri Shimbun (Oct. 16), investigators on October 16 searched RBICO’s headquarters, located in Minato Ward, and retrieved six boxes of files and personal computers in an effort to prove fraudulent investment activity within the Nagano Prefecture Construction Industry Welfare Pension Fund.

The move has uncovered yet more losses in the troubled fund.

Earlier this year, AIJ Investment Advisors (AIJ) were revealed to have fabricated investment gains in an attempt to cover heavy losses for clients, one of whom was the same Nagano construction fund, which had entrusted AIJ with more than 30 percent of its pension assets, or approximately 6.5 billion yen.

According to the Nikkei Shimbun (Oct. 17), the value of the Nagano pension fund’s investments as directed by RBICO dropped from 6.8 billion yen to 2.2 billion yen since the inception of their agreement in 2004.

A statement released by Japan’s Securities and Exchange Surveillance Commission of the Financial Services Agency (FSA) said that RBICO mislead investors “with respect to solicitation of transactions for financial instruments” in violation of the Financial Instruments and Exchange Law.

Management services for the Nagano fund’s assets were provided by various other finance-related companies. The FSA on the same day ordered three firms, Societe Generale Private Banking (Japan), Stats Investment Management, and United Investments, to cease some operations not over fraudulent behavior but for failing to properly regulate the fund’s investment’s activities.

Societe Generale received a three-month suspension, between October 23 and January 22, in some operations related to its pension trust business. For one month, until November 22, the bank will also be forced to limit certain activities in its private banking operations. United Investments will be barred for two months from entering into new discretionary investment agreements. Stats Investment Management will be prohibited from the same activities for one month.

Yhu Kuni, a representative of Stats Investment Management, said, in an email to The Tokyo Reporter, that his firm was hired by the Nagano fund in 2009 to manage assets outside of those presided over by RBICO. The FSA’s penalty was due to inappropriate oversight of a separate investment firm called Knowledge Capital.

“In light of the administrative action, we will strive to prevent any recurrence of similar issues and to restore any damage to investor confidence that may have occurred,” said Kuni.

For RBICO, the FSA said that it often recommended investments into companies on the verge of an initial public offering. Yet, the agency said, the companies were in fact not close to going public. Other investment transactions, according to the Nikkei Shimbun, were simply for the profit of various operations managed by RBICO’s president, Shigeki Iwahashi, who lives in Hong Kong.

An email sent to Iwahashi seeking comment was not immediately returned.

Another point of contention for the Nagano fund is the whereabouts of Yoshinobu Sakamoto, who managed the fund’s pension premiums and dictated the RBICO investments. He is alleged to have embezzled 2.38 billion yen before fleeing overseas in 2010.

The Nikkei added that the FSA does not have the means to impose a ruling on RBICO given its designation as a business that caters to professional investors. Yet, reports public broadcaster NHK, Nagano investigators wish to contact Iwahashi about about his potentially fraudulent activities.