Panel says no cover-up in Japan's Mizuho mob loans scandal
By Taiga Uranaka
TOKYO (Reuters) - Mizuho Financial Group (8411.T: Quote) looks likely to escape serious penalty in a loans-to-mobsters scandal after an outside panel said on Monday that Japan's second-biggest bank by assets did not intentionally cover up the shady lending.
But while Mizuho's president and CEO, Yasuhiro Sato, is now expected to keep his job and resume his efforts to unify the fractious "megabank" and improve its governance, Mizuho faces an uphill battle in catching up with its expanding peers.
The external panel of lawyers hired by Mizuho said in a report that Mizuho's management was lax in its handling of the loans to "yakuza" gangsters, but did not intentionally mislead regulators with an initial false report on the extent of the problem.
"We can say there is no possibility" of a cover-up by the bank, said panel leader Hideki Nakagome, announcing the results of the three-week investigation.
In the latest scandal involving a major Japanese company's ties to the underworld, regulators disclosed in late September that Mizuho had learned in late 2010 of the $2 million in mob loans. The 230 small transactions, mostly car loans, were made by Mizuho consumer-finance affiliate Orient Corp (8585.T: Quote) and were among bulk loans the bank later bought from Orient.
The Financial Services Agency (FSA) ordered Mizuho to improve business practices after the bank did almost nothing about the mob lending for more than two years.
Mizuho initially said that knowledge of the loans went only as far as the bank's compliance officers, but days later the bank acknowledged that the transactions had been reported to top officials, including Sato, at board meetings.
Sato said he had been "in a position to know" about the mob loans, but had not noticed them. Continued...