Odakyu Electric Railway Co. said Monday that its chairman and group CEO Kunio Toshimitsu will resign on June 10 to take responsibility for its coverup of phantom shareholders.
President Toshiyuki Matsuda and the heads of two group companies involved in the scandal will also step down the same day, the company said.
"I am very sorry to betray the trust of the market and stakeholders. It a very grave and unprecedented incident," Toshimitsu told a news conference.
An investigative report published Monday by the railway operator also revealed that Matsuda himself, who will resign with Toshimitsu, directly ordered employees to hide the phantom shareholders.
On May 18, the company announced that some shares in Odakyu Real Estate and Odakyu Construction, registered as owned by individuals, had actually been controlled by the railway company and its affiliates.
Odakyu group officials became fully aware of the existence of these phantom shareholders last fall, when a similar incident at Seibu Railway came to light and developed into a large corporate scandal that resulted in its delisting from the Tokyo Stock Exchange.
However, although a number of companies came clean on the existence of phantom shareholders after the Financial Services Agency urged listed firms to conduct reviews, Odakyu did not disclose this fact at that time.
The company officials said they decided not to disclose the phantom shareholders because the number was very small and the problem had already been fixed by the time of the FSA's request.
During Monday's news conference, however, lawyers hired by Odakyu to investigate the coverup said one of the reasons was that Odakyu officials feared jeopardizing stock-buyback negotiations with Kokudo, parent company of Seibu Railway Co., by revealing they had a similar problem. Odakyu Railway was one of the companies that bought Seibu Railway shares from Seibu's parent Kokudo.