The former branch manager of Daiwa Bank Ltd.'s New York office has laid blame for concealing a $1.1 billion loss squarely on senior management of the bank and on Japan's Ministry of Finance.
Masahiro Tsuda last Thursday pleaded guilty in U.S. District Court in Manhattan to charges of conspiring to defraud the United States and the Federal Reserve Board by concealing more than $1 billion of trading losses at the bank.
Reversing an earlier decision to contest the charges, Mr. Tsuda opted instead to plead guilty to one count of conspiracy under a plea bargain with the U.S. Attorney's office. He faces up to five years in prison and a $250,000 fine.
Sentencing was set for July 12.
A Daiwa trader confessed last July to causing the $1.1 billion shortfall, but Daiwa officials concealed the loss and did not report it to U.S. regulators until September, in violation of U.S. banking law.
Both the bank and the New York branch manager were indicted in November. Late last year, the Federal Reserve ordered Daiwa to close all its banking offices in the United States. The bank pleaded guilty to the charges against it in February and paid $340 million in fines.
Stanley S. Arkin, the attorney retained by Mr. Tsuda, noted in a statement that his client had arrived in the United States from Japan last July 8, just 17 days before he was told by his superiors of the losses.
"At that time and until disclosure was made, Mr. Tsuda's superiors at Daiwa instructed him to maintain secrecy for a certain period of time and communicated to him that the Japanese Ministry of Finance expected the same," Mr. Arkin stated.
"Acting under inordinate pressure from above, Mr. Tsuda felt he had very little choice but to follow the instructions of not only his lifetime employer but also his own government."
Speaking English with some difficulty and obviously distressed, the 54- year-old Mr. Tsuda told Judge Sidney H. Stein that he had been asked by senior Daiwa officials to conceal the loss until after the bank's half-year results were released at the end of September. He also said Finance Ministry officials had given similar instructions.
"I knew that Daiwa was required to report the loss," Mr. Tsuda said. "But I was told that this would have negatively affected the stock market and Japanese banks."
