A former president of Tescon Co., a failed maker of semiconductor testers, and three others were arrested Friday for allegedly paying illegal dividends to shareholders in 1998 immediately before the firm went bankrupt.
Former Tescon head Yoshinori Kikuchi, 60, and the three former executives falsely reported that the company had made enough profits to pay a dividend in the business year that ended in May 1998, in violation of the Commercial Code, police said.
The company, based in Sagamihara, Kanagawa Prefecture, went bankrupt in October 1998 with liabilities totaling 11.7 billion yen.
Police said Tescon reported in its financial statement for that business year sales totaling 1.7 billion yen and pretax profits of 745 million yen, when it was in fact in the red.
Based on the report, the company paid out 74 million yen in dividends, or 10 yen per share.
Kikuchi has told investigators that he wanted to pad the company's earnings to maintain investors' trust because he was seeking to list the firm on the second section of the Tokyo Stock Exchange.
Kikuchi jointly founded the company in 1977 as a venture enterprise to produce semiconductor-related equipment. The company grew rapidly as its products, especially testers, sold well and it was listed on the over-the-counter market in 1991.
In January, the Securities and Exchange Surveillance Commission filed with prosecutors a complaint against the company, Kikuchi and the three former executives, saying the company included false information in its financial statement.