Murakami Fund Going Down

[Mulboyne]

Reuters: Japan prosecutors to arrest Murakami soon
Japanese prosecutors are expected to arrest the country's best-known activist shareholder, fund manager Yoshiaki Murakami, as early as on Monday on suspicion of insider trading in a deal involving scandal-hit Internet firm Livedoor Co., Kyodo news agency reported on Sunday. Quoting "sources familiar with the case", Kyodo said Tokyo prosecutors would arrest Murakami after receiving approval from the Supreme Public Prosecutors Office and the Tokyo High Public Prosecutors Office. Japanese media have reported that prosecutors were investigating Murakami and the fund over its connection to a high-profile takeover battle last year initiated by Livedoor.

It's always helpful to get these arrest previews

[dimwit]

That's so they can have enought time to shred the evidence, especially any links to politicians.

[Mulboyne]

Six years ago, when financier Yoshihiko Kokura was arrested for defrauding Taisho Life, an American FG was working for him and living in Kokura's Tokyo apartment while the man himself lived elsewhere. One day the American went to the dentist instead of work and got a call there from a colleague saying "Don't go home". He pointed out that he had to and so the colleague asked him to meet beforehand at the station.

When they walked to his apartment, they saw that the place was surrounded by press and police. They were able to get through and speak to the police who were bemused by this turn of events. Their records showed that Kokura, the man they had come to arrest, lived in the apartment and not this big-nosed foreigner. It was a similar press report of impending handcuffs that had led the Japanese guy to call the American to warn him. They decided to continue the conversation inside the apartment because the press were beginning to sense a cock-up.

The American didn't speak Japanese but, through his colleague, was able to quickly demonstrate that he was the sole occupant of the apartment. This put the police in a bind since they had planned to show off their arrest to the press. They wanted to be able to be seen to do something so asked if the two would come down to the station to explain everything which would also allow them to be seen taking someone away.

At this point, the Japanese guy became a hero. He said that might have been possible if the police alone had come but, since there was an army of photographers waiting, there was a serious chance of an invasion of privacy. Anything that needed to be sorted, he said, should be done in the apartment. The police then changed tack and asked to see the American's passport, probably in the hope they could find some pretext to get him down the station. The Japanese colleague replied that the officers had been invited in to private property, had no warrant or right to be there and should leave immediately. This they were obliged to do.

They did get Kokura later that day at his office where he had been waiting for them all the time. This is how Kyodo reported the arrest:

Prosecutors arrested two board members of Taisho Life Insurance Co. on Monday on suspicion they swindled the company out of 8.5 billion yen. The two are Yoshihiko Kokura, 39, president of Claremont Capital Holding Inc., the largest shareholder in Taisho Life, and Takashi Yamaguchi, 49, a former executive of an affiliate of Claremont. Investigators also raided the homes of Kokura and Yamaguchi and other places to search for evidence of the suspected fraud.

[Captain Japan]

Anyone know if Murakami has any FGs living at his pad?

[cstaylor]

As the husband of a rabid Hanshin fan, this is only good news for the Tigers. "Murakami's Tigers" just doesn't have the same punch.

[Mulboyne]

Anyone know if Murakami has any FGs living at his pad?

He bought a place in Singapore recently. Looks like he might relocate permanently:

MDN: Murakami admits to insider trading, says he will quit his investment business

Yoshiaki Murakami, head of a controversial investment fund, admitted at a news conference Monday morning that he committed insider trading and said he will quit his investment business. "I caused great trouble," Murakami, 46, told a news conference at the Tokyo Stock Exchange. Prosecutors are set to arrest him on Monday for violating the Securities and Exchange Law.

He admitted that the Murakami Fund's purchase of a massive number of Nippon Broadcasting System Inc. shares while knowing that Livedoor Co. would also do so constitutes insider trading even though he had not been aware of it. "I made a mistake from a lack of understanding even though I'm a professional," Murakami said, adding that he has admitted to the allegations during questioning by prosecutors. He said he will no longer engage in the stock business. "This is the last time that I'll have a press conference here," Murakami said.

[kamome]

Shit, this is big news in the hedge fund world. Do you think he got too "activist" and the police were called in to pound down the nail that was sticking up?

[cstaylor]

I think he broke the law, but enforcement over here seems pretty selective.

[Mulboyne]

I think he broke the law, but enforcement over here seems pretty selective.

That's just about it. This case followed on from findings in the Livedoor investigation. I actually believe Murakami when he says he wasn't really aware he was doing anything illegal. That mindset is true of the majority of Japanese working in finance because the culture of compliance is so weak. It seems to be the foreign firms and newcomers who mostly get hit for infractions - the intention being for these cases to serve as a warning to others.

What is interesting is that Japan may end up with a better record than the SEC or the UK FSA in prosecuting insider dealing cases. These are notoriously difficult to prove and several high profile cases have failed. Even Martha Stewart would probably not have been found guilty of that charge but she got caught out misleading the investigation and was jailed for that crime.

One of the issues worrying hedge funds is that of jurisdiction. Many Japan hedge funds are structured so their dealing doesn't actually take place in Japan. Their offices in Tokyo are advisory companies who "recommend" that an independent fund off shore undertake certain transactions. In practice, of course, the fund does everything because the "advisors" are actually the investors. The Japanese FSA might decide this is a spurious distinction and look into their operations more closely. This would lead to a mass exodus of funds to Singapore, HK, Hawaii and Australia.

Additionally, many funds use similar investment strategies to Murakami. All his major holdings fell sharply when it was revealed that he was under investigation because the assumption would be that he wouldn't be able to follow through with his activist stance and that would have hurt the other funds.

[Captain Japan]

That's just about it. This case followed on from findings in the Livedoor investigation. I actually believe Murakami when he says he wasn't really aware he was doing anything illegal. That mindset is true of the majority of Japanese working in finance because the culture of compliance is so weak. It seems to be the foreign firms and newcomers who mostly get hit for infractions - the intention being for these cases to serve as a warning to others.

When the Muneo Suzuki case originally melted down a few years back the J Gov next expanded their investigation to Mongolia to a project that one of the companies in the Suzuki mess had also been working on. Coincidentally, the company I was working for at the time was slightly involved in the Mongolia situation as well. The company was accused of bribing a Mongolian official for a construction job. My boss asked to me search the Internet and print out all the articles in English on the case. In reading through them the Japanese guy who did the bribing maintained that as far as he knew he had done nothing wrong.

I completely believed the guy. In my experience in construction such practices just sort of were the standard and whether it is technically illegal or not just sort of goes unnoticed. Similar to what Mulboyne said, it was so ridiculously enforced that few thought twice about it.

[Mulboyne]

Bloomberg: BOJ's Fukui Invested With Jailed Investor Murakami

Bank of Japan Governor Toshihiko Fukui said he owns shares in a fund founded by Yoshiaki Murakami, the shareholder activist jailed last week after admitting to insider trading. The central bank chief told a parliamentary committee in Tokyo today that he invested 10 million yen ($87,300) in 1999 when he was director of economic research at Fujitsu Research Institute. Prime Minister Junichiro Koizumi said there's no reason for Fukui to resign. "There is no problem with his conduct," Koizumi told reporters at an evening briefing...more...

No one is suggesting that Fukui did anything more than just invest in Murakami's fund. This episode does illustrate how weak the idea of compliance is in Japan. If someone assumes a government position, especially one where they are making economic policy decisions, they cannot hold an active investment portfolio. Investments don't have to be liquidated, they can be put in a blind trust or any vehicle which removes any sense of a conflict of interest.

[dimwit]

TOKYO — The 10 million yen invested by Bank of Japan Governor Toshihiko Fukui in the Murakami Fund, whose founder has been arrested, has more than doubled in nearly seven years, sources familiar with the matter said Tuesday.

Fukui, now under fire from opposition politicians for the investment, will submit documents about the returns from the investment to the Diet later in the day. The documents cover annual investment returns and the outstanding balance of Fukui's investment at the end of 2005.

Kyodo via Crisscross

What I don't get is how the Fukai could continue in his position giving the natural of the scandal? If it were the governor of the Bank of Canada or the Federal Reserve Chairman they would be out the door in about ten seconds.

[Mulboyne]