A loud mouthed gaijin risks treading on Japanese sensibilities
'So Terry,' I asked, 'what's the latest on the Sumitomo affair?' He didn't reply immediately. Instead he drew in a deep breath, exhaled slowly, took a sip of his Scotch and water and stared into the middle distance.
It wasn't that he hadn't heard or understood my question, although that would have been understandable, given the noise level in the pub in which we were having an early evening drink. But Terry's real name was Teruaki Obata. He had been in London for almost three years but he would still have found it rude to reply to a question without being seen to give it proper consideration.
Nevertheless, he had been in the west long enough to know that 'That is a very interesting question' was not a sufficient reply. Instead, as he refocused, he said slowly, 'I thought your interest was stocks rather than commodities.'
'Well a $1.8 bn loss is always interesting,' I explained. 'And there are questions of regulation which impact on all financial markets. So what are they saying in Tokyo?'
Terry went into another short trance. Coming out of it, he took a sip of his drink. Then he said: 'We are waiting for the company to complete its investigations.'
I knew I was embarrassing him and should have shut up. That a 400 year old zaibatsu was involved in an international scandal was obviously a cause of national distress. But I too had been at the Scotch and we were in the west. I decided to play the loud-mouthed gaijin, insensitive to Japanese sensibilities.
'It's a big international story,' I asserted. 'I mean it's being looked into by Scotland Yard, the US Attorney's office, the Securities and Investments Board in London and the Commodity Futures Trading Commission in New York. You must be writing about it.'
After another bout of introspection, he drained his glass and told me that there were many conclusions to be drawn. 'Companies needed to set up better systems for detecting fraud and monitoring unnatural looking trades. The Barings affair showed the damage a rogue trader can do.'
It was now my turn to pause for thought. Nick Leeson and Yasuo Hamanaka might well have been similar animals but there was a fundamental difference, I suggested. Leeson's bosses plainly did not know what was going on whereas Hamanaka's apparently did.
'In Japan managers take responsibility for the actions of their subordinates, not like here,' he said. I asked what he meant. 'Well, Mr Leeson goes to jail but his bosses go free.'
I pointed out that they had lost their jobs. 'Yes,' said Terry. 'But some of them have new well paid jobs in the City.'
No amount of contemplation would produce an answer to that so I asked if he wanted another drink. 'Why don't we go to my bar?' he suggested.
So we left the crowded pub behind and after a short walk found ourselves in the traditional Japanese - modern Italian style bar that was once all the rage in Akasaka.
It was filled with salarymen who had not yet learned the western habit of going home to their families in the evening. On a low platform at one end a plumpish, jacketless middle-aged man was singing enka; whether he was any good or not, I couldn't tell.
A hostess greeted Terry by name, showed us to a table and then brought over two glasses and a half full bottle of Scotch with his name on it.
At ease in a familiar environment, Terry asked if he could put a question to me. It was: 'Why do you think it is so wrong if Sumitomo's management authorised Mr Hamanaka's dealings?'
'Well the worst that could be said about Barings management was that they were incompetent,' I suggested. 'And incompetent management is better?' came the sharp riposte. 'Would the Barings bondholders agree with that?'
'That's not the point,' I said, rather too aggressively for our surroundings. 'Hamanaka was not a "rogue trader" like Leeson. There is strong evidence that the company knew of and assisted him with his wrongdoings for years. That is a very serious charge. Don't you see, Japan's reputation is on the line.'
'The president of Sumitomo has apologised to the regulators. He said he was profoundly embarrassed by severe violations of the company's business policies. What more is there to say?'
'A lot,' I thought but was unable to say it because a round of cheers burst out for the enka singer who had finished his song. The microphone was picked up by an almost identical man who, after a quick word with the lady by the karaoke machine, indulged his fantasy of being Frank Sinatra.
The song he had chosen was Fools Rush In. I took the hint and shut up.
The OTCQX® marketplace offers the best-informed and most efficient trading of US and global companies. To qualify for the OTCQX marketplace, companies must meet high financial standards, be current in their disclosure and be sponsored by a professional third-party adviser. Designed for the largest and most liquid shareholder-friendly companies, OTCQX ensures investors have the information necessary to intelligently analyze, value and trade their securities.
To learn more, visit us at www.otcmarkets.com.
Please take a moment to read an opinion piece on dividend taxation and the debt bias from OTC Markets Group’s president and CEO, R Cromwell Coulson. Just published on Forbes.com, the column discusses how the US tax code currently favors interest payments on debt over dividend payments to shareholders and possible changes in the US dividend tax rate could make it significantly worse. It also explains why removing the debt bias from our US tax policy will promote growth and a strong economy, and will allow profitable companies to return excess capital to their shareholders. To learn more about OTC Markets Group, visit our website: www.otcmarkets.com.
To view this report, please click here.