Chief of Nomura Resigns Over Insider Trading Scandal
Kenichi Watanabe, right, chief of Nomura, announced his resignation on Thursday. He will be replaced by Koji Nagai, the bank's president.
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Kenichi Watanabe, the chief executive and architect of Nomura's takeover of Lehman Brothers' Asian and European operations, resigned to take responsibility for the scandal, together with Takumi Shibata, the chief operating officer.
They will be succeeded by Koji Nagai, who leads Nomura's securities unit, and Atsushi Yoshikawa, chief of Nomura's operations in the United States, the company announced. The management changes were approved by Nomura's board early Thursday.
"I resign," Mr. Watanabe said, offering no apology in his opening remarks at a news conference in Tokyo. He said he had started the promised effort to bolster Nomura's internal controls while continuing to investigate insider trading at the firm.
"Now it is time for a new era with new people," he added.
Mr. Nagai promised to regain investor trust in the bank. "I intend to reform the company mind-set," he said.
The resignations are a fresh blow for a brokerage firm that has struggled since snapping up Lehman's international operations four years ago.
Nomura and the British bank Barclays, which took over most of Lehman's North American operations, swallowed the businesses at the height of the financial crisis in 2008 in bold, risky bids to bolster their global standings. But now, as Barclays faces an investigation of interest rate manipulation, Nomura is embroiled in its own new scandal: accusations of widespread leaks of privileged information, part of a widening insider trading investigation by Japanese regulators.
After an internal investigation, Nomura acknowledged that employees had leaked information on at least three public offerings in 2010 to favored fund managers, who were then thought to have used stock short-selling to make money on the drop in the share prices of the three companies.
Investors reacted positively to reports of the management shake-up, first reported by the business daily Nikkei, driving Nomura shares up almost 6 percent before its earnings announcement later in the day.
After stock markets closed, Nomura said it had eked out a net profit of 1.98 billion yen ($25 million) in the three months ended June 30, down almost 90 percent from the 17.7 billion yen it reported in period a year earlier, a result that exceeded analysts' expectations. Nomura's chief financial officer, Junko Nakagawa, credited a $1.2 billion cost-cutting drive, which she said had been completed ahead of schedule.
The scandal at Nomura, the biggest Japanese investment house, has prompted much soul-searching. Some experts see roots of the scandal in Nomura's acquisition of Lehman's European and Asian businesses, which they say was an audacious pursuit of scale and profit that diverted attention from compliance, even as investment banks came under increased regulatory scrutiny.
Source: The New York Times | HIROKO TABUCHI
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