3 held for alleged investment law violation over 'Swiss' fund.

OSAKA, Jan. 9 Kyodo

The head of an Osaka finance company, dubbed Swiss Private Fund (SPF), and two former executives of the firm and an affiliate were arrested Thursday for allegedly violating the investment deposit and interest rate control law, police said.

The SPF group, claiming to have global headquarters in Zurich, Switzerland, is alleged to have obtained money from investors throughout Japan, saying it would invest money in financially solid ventures, but instead loaned the money to heavily indebted borrowers by charging interest rates higher than the legal ceiling.

Arrested Thursday were Chairman Masaru Wanaka, 57, Emiko Natsukawa, 38, a former official of an affiliated company, and Hajime Okada, 30, a former SPF executive. The three are all from Osaka city.

The three are alleged to have collected a total of 158 million yen from nine people between May 2001 and July 2002 by guaranteeing the repayment of the principal and interest payments in violation of the law that bans businesses from guaranteeing such repayment and a return on the original investments.

The police, however, suspect the company gathered as much as roughly 3.3 billion yen from around 640 investors.

Wanaka, when questioned by the police last year, said he does not believe his company was violating the law because the money was invested in affiliated companies. Police sources say these affiliates were running the loan operation.

On Thursday, the police also searched the suspects' homes and other locations as part of investigations. SPF itself was searched in September last year.

Four affiliated companies filed for court protection from creditors under the Civil Rehabilitation Law Dec. 18 last year but one investor filed a 22 million yen damages suit Dec. 24 against Wanaka and his company and the four affiliates, saying an investment contract he signed was illegal and invalid.

The man, who paid 20 million yen to the SPF group, claimed that he was lured by SPF's advertisement soliciting investment for ''the world's top financial products made the best by Switzerland.''

SPF had once claimed on its Web site it is an international financial company with its global head office in Zurich, but after the company was targeted by police investigators last year, Wanaka said in a media interview that he may have ''inconvenienced'' people by describing the firm inappropriately, but said that no inconvenience should have been caused in actuality.