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2ND LD: Police arrest former Maruishi Cycle chief, 4 others.

TOKYO, June 1 Kyodo

(EDS: ADDING DETAILS, INCORPORATING TSE TO MOVE MARUISHI HOLDINGS TO MONITORING POST DUE TO SCANDAL)

Police arrested a former president of Maruishi Cycle Industries Ltd. and four others on Tuesday, just ahead of the listing of its holding company on the Tokyo bourse, on suspicion of arranging a dubious capital increase in the struggling Tokyo-based bicycle maker.

The Metropolitan Police Department arrested Yoshio Yagi, 52, who was fired as president on May 25 after being questioned by the police, Yukuo Mera, a 56-year-old Maruishi Cycle official, and three others over fraudulent documents for a capital increase.

Meanwhile, the Tokyo Stock Exchange said Tuesday it will transfer the stock of Maruishi Holdings Co. to its monitoring post immediately after listing it on the Second Section next Tuesday because of the case involving the former president of a subsidiary.

Investors need to be given time to digest allegations that Maruishi Cycle is suspected of arranging a fictitious capital increase, the TSE said.

According to investigators, Yagi and others planned to arrange to temporarily increase the capital account of Maruishi Cycle, which is struggling against competition from low-cost imported bicycles.

In mid-March last year, Shoreikai, a hospital operator in Ota, Gunma Prefecture and a business partner of Maruishi Cycle, borrowed around 274 million yen from a nursing-care service company in Tokyo to purchase 4.5 million new shares in Maruishi Cycle, the investigators said.

The money was sent to a bank account of the bicycle company but was entirely withdrawn the following day to be passed on to Shoreikai, the investigators said.

In May the same year, the five are suspected of having made fake registrations with the Tokyo Legal Affairs Bureau to modify the balance of outstanding shares and the amount of Maruishi Cycle's capital.

Yagi, Mera and the three other suspects have all admitted to the allegations, with Yagi having said he played a central role, according to the investigators.

They believe repeated attempts were made at similar capital increases in order to cover fund shortages amid the slumping business at Maruisihi Cycle as well as at Shoreikai.

Maruishi Cycle President Takashi Nagahori said earlier he does not believe there have been any irregularities.

The investigators believe a large number of promissory notes issued under Maruishi Cycle's name have been passed on to financial brokers and gangsters.

The stock of Maruishi Cycle was delisted from the TSE's Second Section last Wednesday in preparation for the listing of Maruishi Holdings.
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Publication:Japan Weekly Monitor
Date:Jun 7, 2004
Words:412
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