Daio Paper’s former chairman arrested

Mototaka Ikawa, 47, former chairman of Japan’s Daio Paper and grandson of the founder, was arrested on charges that he diverted more than $130 million from seven affiliated companies, primarily to fund his gambling habit,

the

Financial Times

reported.

Ikawa’s lawyer said he admitted borrowing more than 10 billion yen from the companies, the

FT

report said. Ikawa said he started gambling after losing money in the foreign exchange and futures markets.

Daio Paper’s shares have dropped about 27%, and the company has been put on watch for potential delisting from the Tokyo Stock Exchange, the

FT

article said.

According to a committee hired by the company to investigate the matter, Ikawa borrowed money from affiliated companies and demanded that executives at the companies deposit money into his personal bank account. The executives did so without asking for collateral or seeking board approval for the loans, the

FT

reported. Ikawa told Daio Paper’s auditor that he was using the money for new businesses.

Ikawa resigned as chairman when news of the loans surfaced in September. He has repaid about 4.5 billion yen and promises to repay the remainder with his own money and shares in companies related to Daio Paper. (Source:

Financial Times,

Nov. 23, 2011.)