Former Deutsche Bank salesman admits bribery in Tokyo

A former Deutsche Bank AG salesman, Shigeru Echigo, admitted to bribery charges at his trial in Tokyo on 22 April 2014. He also said he acted on direct instructions from his managers.

At the start of his trial in the Tokyo District Court, Echigo accepted prosecutors’ argument that he bribed a pension fund executive to buy investment products. Echigo, 37, spent about ¥900,000 entertaining an executive from the Mitsui Group’s pension fund on 15 occasions from April to September 2012. The fund reportedly bought ¥1 billion of investment products.

The charges relate to meals and golf outings that constituted a breach of Japanese law because the pension fund included public money. Japan’s Financial Services Agency applies much stricter controls on how funds that accept public money do business compared with wholly private funds.

The defendant said that his conduct was institutional at the German bank’s Japan brokerage unit.

 “My actions as a salesman were part of systematic conduct based on the instructions and consent of my bosses at Deutsche Securities,” Echigo, told the court. His lawyers showed evidence based on police and prosecutors’ interviews with his former bosses and colleagues that managers encouraged the spending.

If convicted, Echigo faces up to three years in prison or a maximum fine of ¥2.5m. The trial is currently adjourned until June 17.
Separately, Deutsche Securities last year became the first brokerage penalized in Japan for breaching client entertainment rules after spending ¥6.3m on executives from three pension funds between 2010 and 2012. The Financial Services Agency ordered compliance improvements in December, and the bank disbanded the pension team.

The German firm is the biggest financial institution to have been caught in the FSA’s drive to tighten supervision of Japan’s financial industry following the 2012 collapse of AIJ Investment Advisors. That company collapsed after defrauding pensioners of ¥102bn in investments. The ensuing scandal sparked a wide-ranging review of firms that manage money, the intermediaries who sell financial products to them, and the transactions between them.

Paradoxically, the crackdown on the pension industry comes at a time when the Japanese government is encouraging the private sector to spend more on wining and dining by raising tax exemption limits. However, entertaining public officials continues to be strictly off limits following scandals in the 1990’s when finance ministry bureaucrats were dined at expensive restaurants in return for information.