3RD LD: TSE to delist Seibu Railway Dec. 17 for false statements.

TOKYO, Nov. 16 Kyodo

(EDS: ADDING MORE INFO)

The Tokyo Stock Exchange said Tuesday it will delist Seibu Railway  Co. on Dec. 17 for falsifying financial statements in ''a systemic manner.''

The TSE has judged that the railway company's long-running practice of underreporting the ratio of stakes held by major shareholders has undermined investor confidence in the securities market, bourse officials said.

The bourse typically only delists companies at risk of bankruptcy.

Seibu Railway President Terumasa Koyanagi apologized to its shareholders at a news conference, saying the firm ''has caused trouble'' to them over the incorrect financial statements. ''I offer my sincere apologies.''

The TSE will move Seibu Railway's stock to its liquidation post from the monitoring post Wednesday. Investors can trade the shares until Dec. 16 even after their transfer to the liquidation post.

Seibu Railway said Tuesday it has begun preparations to go public on the Jasdaq over-the-counter stock market by the end of next March for the convenience and interest of shareholders after delisting.

''We will do all we can to have the stock registered for the Jasdaq market by the end of the current fiscal year,'' Koyanagi said.

The president also said Seibu Railway will aim to be listed on the TSE again. ''We really regret the delisting. We will try to make our company trusted by society and listed again.''

Industrial analysts point out that delisting may make Seibu Railway's fund procurement through debenture issuance and manpower recruitment difficult.

Delisting may also affect Seibu group firms' plans to borrow money from banks backed by the credibility of Seibu Railway as a listed firm, the analysts say.

Koyanagi said he does not think the delisting will hurt the railway firm's financial standing.

The TSE said Seibu Railway, listed on the bourse's First Section, has violated listing requirements as its false financial statements have brought about serious adverse effects and as a result the railway operator failed to protect investors.

As a part of efforts to prevent a recurrence, Seibu Railway said it will request ChuoAoyama Pricewaterhouse Coopers to audit the firm. The company currently entrusts auditing to individual accountants.

The TSE said the railway operator's practice of issuing false financial statements about the holdings of major shareholders dates back to 1957 or earlier.

TSE President Takuo Tsurushima said Seibu Railway falsified equity ownership information in its financial statements ''in a systemic manner'' and a former executive of the railway company was involved in sale of the firm's shares off-market before it admitted false reporting on Oct. 13.

Seibu Railway said on Oct. 13 that it underreported the stakes held by major shareholders, including its largest shareholder Kokudo Corp., a privately held company that effectively controls the Seibu Railway group.

The TSE found that Seibu Railway shares registered under the names of individuals were effectively controlled by Kokudo and that the railway company conducted ''abnormal administrative work'' to continue the practice, such as keeping seals of the individuals at the firm.

The bourse also found that those in charge of the administrative work were later promoted to senior managerial posts.

To prevent similar falsifications, the TSE said it will request heads of listed firms to certify their financial statements.

Financial Services Minister Tatsuya Ito said during a news conference Tuesday he believes the TSE's decision to delist the railway operator is a result of the bourse's ''impartial judgment over serious mistakes in Seibu Railway's disclosure.''

The minister said Seibu Railway shareholders may seek damages over the delisting and that companies should disclose their information properly.

Ito said the Financial Services Agency will ask all the 4,500 listed companies to review their financial statements within a month and report corrections if they find errors.

The agency will also work to create a new system to promote disclosure of corporate information, which would involve accepting information on irregularities via fax and e-mail, he said.

Hiroshi Koshida, chairman of the Japan Securities Dealers Association, said at a regular press conference Tuesday that Seibu Railway's falsification of statements ''shakes the foundation of a stock market'' and emphasized that proper disclosure is a ''minimum requirement'' for companies.

Land, Infrastructure and Transport Minister Kazuo Kitagawa said his ministry will urge Seibu Railway to disclose its information even after delisting, saying, ''Whether it is listed or not, we want a railway company that serves the public to provide information properly.''

In a related development, Matsushita Electric Industrial Co. said Tuesday it has requested that Kokudo ''restore the original state'' in connection with its purchase of Seibu Railway shares. Matsushita bought 2 million shares in the railway company for 2.2 billion yen.

Kokudo sold some Seibu Railway shares it had held off-market in August and September to a dozen companies with which it had business relationships without informing them of the equity ownership conditions in the railway company. A number of buyers have demanded that Kokudo buy back the shares.