(June 20, 2012) — Japanese authorities have arrested the president and three other employees of asset manager AIJ Investment Advisors in connection with a $1.4 billion pension scandal.
AIJ, which managed the money of roughly 90 small pension funds, allegedly suffered losses of $1.4 billion and hid them from its clients for almost a decade, prosecutors said. Authorities also accused Kazuhiko Asakawa, AIJ’s president, and the three other executives of defrauding two Japanese corporate pension funds out of almost $90 million.
AIJ has been under official suspicion since January, when the country’s Securities and Exchange Surveillance Commission audited the company and found discrepancies in its accounting. In March, the commission raided AIJ’s Tokyo headquarters and the firm’s license as an asset manger was revoked.
“I didn’t want to use inflated figures for the pensions fund, but [I did because] I did not want to come back with losses, no matter what,” Asakawa told a parliamentary panel investigating the matter at the time. Prosecutors have specifically accused Asakawa and Shigeko Takahashi, another AIJ executive, of conspiring to paper over the firm’s losses while doctoring performance records in clear violation of Japanese financial laws.
Japan’s anemic growth of the past two decades, exacerbated in recent years by global economic turmoil and domestic natural disasters, has forced the country’s asset managers to look abroad and in unconventional places for strong returns. This reality, coupled with Japan having the largest population of geriatrics in the world, ensures that the island nation’s pension managers are under heavy pressure to secure robust returns in an environment in which they are hard to come by.
AIJ’s implosion marks the latest scandal to rock Japan’s financial markets in recent months. Revelations in late 2011 that camera maker Olympus had concealed $1.7 billion worth of losses for 20 years shocked many in the country.