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Friday, March 24, 2000
IGUCHI REBUILDING LIFE AFTER SCANDAL
Daiwa's rogue trader dreams of a return
By TOMOKO OTAKE
ATLANTA -- The culprit in a financial scandal that rocked Japan nearly five years ago now has his eye on a second shot at the financial arena from a most unlikely place -- a small town some 60 km northeast of Atlanta.
Toshihide Iguchi, a former star bond trader at Daiwa Bank's New York branch, made international headlines in 1995 with revelations that he had racked up $1.1 billion in trading losses from 30,000 unauthorized deals spanning 12 years.
The disclosure came through a letter of confession Iguchi mailed in July 1995 to then Daiwa President Akira Fujita. Contrary to his expectations, the bank turned Iguchi in to prosecutors. In December 1996, he was sentenced to four years in prison and slapped with $2.6 million in fines and restitution.
More than three years have passed since then. As one of the biggest financial debacles in the world begins to fade from memory, the 49-year-old Kobe native is quietly rebuilding his life in Dacula, a town in Georgia with a population of 2,217.
Life is not easy for him. Sick of the New York that doomed his career, he moved here last August to start all over, following his release from prison last March.
But instead of rebuilding his career, he has been building kitchen cabinets and bar counters at a nearby factory, making $1,600 a month.
Because he is on probation until March 2004, Iguchi is barred from making a living by managing other people's assets -- something he feels he is still good at -- on the grounds that the state would not be able to track his earnings.
His probation officer demands that Iguchi get "verifiable employment" so that 10 percent of his pay can be deducted for restitution payments, he said.
"I don't have a decent resume, as you can tell," the tanned, well-built man clad in a pastel green polo shirt and khaki pants said at his home recently. "Plus, I'm obligated to tell my prospective employers that I am a criminal. I couldn't find a decent job."
Iguchi said he is putting up with the physical labor and low pay because his probation officer told him he would be sent back to New York unless he found an employer by the end of last October.
He is technically broke, despite the $130,000 he earned in royalties from his autobiography, published in January 1997. The book, "Confession," shed light on many of the problems endemic at Japanese banks operating internationally at that time.
He describes how elitist bank managers dispatched from Japan had no understanding of U.S. law and business practices. As a local hire who spoke perfect English, Iguchi could fit in with both the Japanese managers and locally hired Americans, who were treated as second-class citizens.
The book also gives a thrilling account of how a $50,000 trading loss he suffered one day in 1983 snowballed into $1.1 billion over time, and how he managed to come away unscathed every time he thought he could no longer fake it during inspections by U.S. and Japanese regulators.
The Japanese-language book has sold nearly 160,000 copies in hardcover and paperback, and continues to sell well, said Susumu Shimoyama, the editor who asked Iguchi to tell his story.
The book deal, however, hardly helped him financially, Iguchi claims. Because he was in prison, he entrusted financial matters to his accountant, who took more than half of the royalties, he said.
Iguchi hired a lawyer to study if he should sue the accountant, which cost another $12,000. Although the lawyer said Iguchi had a good chance of winning, he gave up halfway through because legal fees for further action would have left him with no money.
"In America, you get cheated if you are weak," he said bitterly.
Even his upmarket four-bedroom house, located among a cluster of newly built residences on a hill, is not something he paid for by himself.
His second wife, Akemi, who came into his life before his arrest as a private tutor for his two sons, sold her studio apartment in New York and paid for part of the mortgage, he said.
He attributed his current hardship to the way the U.S. government "used" him. It succeeded in levying $340 million in fines against Daiwa, with Iguchi as its only witness. "And once I'm out, they try to finagle money from me," he fumed.
The $2 million fine will expire in five years, but the $570,000 restitution will haunt him forever, levying a certain portion from his income every month until he pays the full amount.
Iguchi said he lost his case long before his indictment. If his priority had been to protect himself, he would have remained silent instead of confessing everything to the bank, he said.
But looking back, it was the right thing to do, he added, comparing himself to Nick Leeson, who plunged Britain's oldest investment bank, Barings PLC, into bankruptcy in February 1995 through speculation, and Sumitomo Corp. rogue trader Yasuo Hamanaka, who inflicted huge losses through unauthorized copper trading.
"Nick Leeson ran away after the scandal came out, and the Sumitomo Corp. copper trader clammed up in court," Iguchi said. "I think I did justice by exposing my wrongdoing to the bank, the prosecution and to the society. That's something I will always be proud of."
Pride and support from his young wife might be the only thing that keeps him going. His first wife, an American, left him in 1985. In his book, he conceded that his preoccupation with loss-hiding was partly to blame for the divorce.
Although it was trading that inflicted so much pain on him and his family, it is obvious Iguchi has not been able to shake off his passion for it.
While spending time in his tiny cell at the Manhattan Correction Center, he said he voraciously read books on trading, eager to gain the insight to how he could win. The lesson he learned had more to do with self-discipline than technique.
"Trading isn't fun, it's excruciating," Iguchi said. "The market is a monster. After you make money, it always comes back and takes the money away from you. (But) I just want to try again, whether I have an aptitude for trading, whether I can accomplish what only several out of 100 traders can, which is to control losses."
And he feels he is better-prepared now -- at least mentally.
"When I started out as a bond trader (in the late 1970s), bonds were not something people would trade," Iguchi said. "There was no textbook on it, and we learned from scratch. By the time I began to understand what it takes to win, my losses had grown too big. In my last days, I was not in a normal state of mind."
So he wants a second chance. There is no knowing if he will succeed, and if he fails next time, he said he will resign himself to living as a cabinetmaker. But one thing is certain: He is good at making the best out of the worst circumstances.
In prison, he lived with people he had never crossed paths with before: gang members. He was the only white-collar criminal around, and yet he more than survived.
It was during this period that he developed a friendship with fellow convict George Harp, a much-feared tough-guy figure in his mid-60s who founded a gang throughout the U.S. prison system. Iguchi is writing a nonfiction account of the life of Harp, who has spent 30 years behind bars.
And even his present job has given him an important skill.
"Now I know how to build things," Iguchi said, showing his basement, which currently is just a big open space with bare support posts. In one corner, dozens of tools hang from the cement wall.
"If things go well, I want to convert this basement into a trading room," he said, squinting his eyes, as if to recall the bustling trading floor in New York.