Posted by: Ian Rowley on June 4, 2009
More trouble at Aozora, the Japanese bank owned by U.S. private equity giant Cerberus. According to reports in Tokyo, Japan’s Securities and Exchange Surveillance Commission raided Aozora’s offices today amid suspicion that a bank employee had traded stocks using insider information.
While the report doesn’t suggest the alleged crime is anything other than the actions of an individual, it’s the last thing the struggling bank needs. As I wrote recently, Aozora lost $2.5 billion in the year through Mar. 31 and wrote off about $930 million after running up losses in investments in hedge funds and other toxic assets. The bank also booked a $136 million loss related to Lehman Brothers’ collapse last fall and took an additional $372 million hit on a stock investment in General Motor’s GMAC financing unit. That may seem like an odd investment for a Japanese bank, until you consider that Cerberus is also a major shareholder in GMAC, a fact that has drawn public criticism from Japan’s top financial regulator. If all this weren’t enough, Aozora had a $120 million exposure to a fund run by convicted financier Bernard L. Madoff. Frustrated by the poor performance of Aozora and Shinsei Bank, another midsize bank part-owned by U.S. private equity, the Japanese authorities are reportedly pushing the two to merge. “It’s been a terrible year for our industry and for Aozora Bank,” acting CEO Brian Prince, an ex-Wall Streeter and former Shinsei banker, said in a statement on May 15. After today’s development, this year isn’t looking a whole lot better.