Regulators probe Japan’s Aozora Bank for possible insider trading

Aozora Bank probed for possible insider trading

TOKYO — Japanese regulators are investigating a possible case of insider trading at Aozora Bank Ltd., the midsize lender said Thursday.

Local media reported that the Securities and Exchange Commission raided the bank’s headquarters in central Tokyo and questioned an employee in its loan division.

The employee is suspected of buying shares in a company, which was the target of a takeover bid by an Aozora Bank client, before the customer went public with the announcement, Kyodo news said without naming sources.

Aozora acknowledged the investigation later in the day but declined to provide details. The bank is “responding to the investigation with its full cooperation,” it said in a statement.

The SESC also declined to comment on the case.

The inquiry comes at a time when the money-losing bank is struggling to turn itself around. New York-based Cerberus Capital Management LP owns more than half of Aozora.

The bank posted a group net loss of 242.6 billion yen ($2.5 billion) last fiscal year. It forecasts a 5 billion yen profit this year through March 2010, saying it “will make every effort to realize its intent of returning to profitability.”

In February, Brian Prince took over as acting president and chief executive officer after Federico Sacasa resigned and the bank apologized for its poor performance.

The Japanese government bailed out Aozora’s predecessor during Japan’s last banking crisis in the 1990s, but it has yet to fully repay the public funds received.

In trading Thursday, Aozora shares were unchanged at 144 yen.