Former OSE exec found not guilty of manipulation, surprising bourse

OSAKA (Kyodo) The Osaka District Court found a former Osaka Securities Exchange vice president not guilty Thursday of market manipulation, saying he conducted dubious stock deals only to "activate the market."

Takuo Noguchi

Takuo Noguchi, 67, had "no aim to manipulate the market to cause a change in prices" when making the trades in question, presiding Judge Yoshifumi Asayama said.

Noguchi stood accused of faking stock options deals between 1998 and 2000 to boost trading volume so that stock option trading on the OSE appeared to be more brisk than that on the Tokyo Stock Exchange. Stock options were introduced at the two bourses in 1997.

Although criticizing Noguchi for misleading investors and for the OSE's loss of credibility, the judge said, "His act cannot be subject to punishment under the Securities and Exchange Law."

Prosecutors had demanded a one-year prison sentence for Noguchi, saying his act constituted market manipulation, because trading volumes are important data for investors.

Noguchi's defense did not dispute the facts alleged by the prosecution, but argued that their client had no criminal intent.

"He wanted to win the competition with the TSE but had no plan to manipulate the market. It is questionable if his acts can be considered a crime," the lawyers argued in court earlier.

Noguchi, a former Finance Ministry bureaucrat, was indicted in July 2003 for making 593 faked trades through OSE affiliates to make the stock option trading volume on the exchange seem larger than it actually was.

Noguchi joined the OSE as a managing director in 1993 and was promoted to vice president in 1999.

He resigned from the position in June 2000 to take the blame for his unauthorized establishment of an OSE affiliate for the trades in question.

The ruling came as a surprise and an embarrassment to the OSE, which had expected a guilty verdict and lodged a 520 million yen damages suit against Noguchi and another former OSE executive over the charges.

A current OSE executive said the exchange would have to consult its lawyers about the damages suit.

But the OSE said in a statement that Noguchi's act has actually affected public confidence in the OSE and the overall stock market. The OSE will pursue the damages suit against Noguchi, it added.

The Osaka District Public Prosecutor's Office deplores the ruling, a prosecutor said. The prosecutor did not say whether the office would file an appeal.