TOKYO — Japan froze operations Friday at an investment firm accused of losing most of the $2.3 billion in pension funds it manages, as a report said it may have hidden losses for years in an Olympus style scandal.
The head of the Financial Services Agency (FSA), Shozaburo Jimi, suspended AIJ Investment Advisors until March 23 as it carries out a probe into one of the biggest cases of its kind in the country.
“The FSA, together with the labour ministry, will take every possible step to prevent this kind of incident from happening again,” he said, adding the agency would probe all 263 of Japan’s investment management firms as soon as possible.
Investment is involved in many areas of the economy, such as business management and finance whether for households, firms, or governments.
Exact details of how much has been lost were not available as the FSA said it was unable to comment on an ongoing investigation.
The case comes as Japanese camera giant Olympus is embroiled in a massive scandal, with Tokyo prosecutors last week arresting seven people — including a former president and vice president — for their alleged role in covering up $1.7 billion in investment losses.
Friday’s announcement followed a report in the Nikkei business daily that AIJ — which had a reputation as one of the few asset managers to deliver positive annual returns — had lost most of the 183 billion yen ($2.3 billion) in pension fund contributions that it held.
The company, which was set up in 1989, may have lied to clients for years about reaping cumulative returns of up to 240 percent since it started management in the early 2000s, the Nikkei said.
In footage shown on national broadcaster NHK, Sei Takahashi, a lawyer representing AIJ, said: “We have nothing to disclose at the moment as we are under investigation.
The company had 124 clients and managed 198.4 billion yen of assets by September 2011, according to the Nikkei.
The company mostly controls group pension plans for small and midsize businesses in industries such as trucking, construction, electrical work and plumbing, the Nikkei said.
They also include a handful of big name firms, including technology companies Advantest and Yaskawa Electric.
However, Yaskawa Electric said the scandal’s impact on its pension scheme would be “very small” as less than two percent of its corporate pension fund was in the hands of AIJ.
Although the Government Pension Investment Fund lost 0.25 percent, in the year ended March 31, 2011 GPIF was still the world’s largest public pension fund which oversees 114 trillion Yen .
Advantest, a major producer of semiconductor manufacturing devices, declined to comment on the business suspension.
DV Urban used the Chicago government pension funds’ money to buy eight properties, including a vacant lot that once housed a Dominick’s grocery story at 3030 N.
On the Tokyo Stock Exchange, Advantest shares rose 0.81 percent to end at 1,118 yen, but Yaskawa was down 0.75 percent at 790 yen, while the benchmark Nikkei gained 0.54 percent.
At Olympus ex president Tsuyoshi Kikukawa and former vice president Hisashi Mori have admitted falsifying the firm’s balance sheet to cover up the fact that the company lost large sums on bad investments during the 1990s.
The 92 year old firm’s admission that a small group of top executives used overpriced deals to cover up the losses has shaken confidence in Japanese corporate governance.
Phaedon George is a business journalist based in Hobart, Australia. Phaedon has a passion for financial markets and breaking news stories and loves writing about business news, stock market, and economic opinions that matters most to its audience. Phaedon spends a lot of time discovering and researching latest financial markets and industry news stories in order to make sure the latest and greatest stories are brought to you first on BigBoardNews.com.
