A Los Angeles executive filed suit Monday against Saitama Bank Ltd. in what is believed to be one of the first such actions by a U.S. shareholder against a Japanese company.
Robert Wang, president of Trans Orient Trading Co. in Los Angeles, alleges that Saitama and its directors wasted and mismanaged corporate assets and breached fiduciary duties by purchasing a huge block of stock in a Japanese manufacturing company at what Wang contends were grossly inflated prices.
An official at Saitama in Los Angeles refused to comment on the suit, filed in U.S. District Court in Los Angeles.
The actions that Wang is challenging are relatively common in Japan. Japanese banks often buy substantial holdings in companies they do business with, said John B. Houck, partner at the law firm of Jones, Day, Reavis & Pogue in Los Angeles. Those holdings are part of a close-knit business relationship that helps keep bank customers loyal to their banks and vice versa.
Wang's attorney, Wayne Peterson, acknowledged the common nature of the practice but contended that the bank violated U.S. and Japanese securities laws by failing to disclose that a company involved in the stock sale was closely affiliated with Saitama. The bank's stock is traded in the U.S. over-the-counter market.
Moreover, directors should have negotiated a better purchase price for the securities, according to the suit. Wang, who owns 1,000 shares of Saitama, wants directors to reimburse the company $150 million, which he says is the difference between what Saitama paid and what the stock was worth.