Double Jeopardy in Tokyo

On a sweltering hot afternoon in the summer of 2002, in an air conditioned conference room high in a Tokyo office tower, I sat opposite a team of Japanese SEC officials. They were steadily raising their voices, now almost shouting, accusing me of insider trading. The man in the middle, a mid-aged man with thick swept back hair, named Okada-san, peppered me with questions and accusations, while his two colleagues sat expressionless, studying my every movement. They wore the dark blue suits, white shirts, and pressed ties that were the standard uniform of Japanese government bureaucrats. I was an outsider.

“You must have been in contact with a journalist at the Wall Street Journal or Bloomberg News. Who gave you the information?”

“I've told you many times, I do not know any journalists.” I had only recently left a masters degree program in America. Without a degree, yet having studied Japanese, I managed to land a job at a tiny European stockbroker in Tokyo. One where I was still employed two years later. As they asked me these questions, I didn’t know how someone who was still virtually an intern like myself would know journalists at major media outlets.

“Someone must have given you the information. We all know foreigners are helping other foreigners!”

“I don’t know what you want me to say.” I shrugged my shoulders. They had been asking me the same questions every afternoon for hours for two weeks running.

“You were the first trader to sell shares in Ikeda Corp. How did you know the company was going bankrupt?”

“It was on TV. The news broadcast said Ikeda Corp had filed for bankruptcy, and the stock was still trading, so-” I pointed at the details on a printout. “At 10:27am I pushed the sell button.”

I had told them this every afternoon. They would ask the same question, and I would tell them the same answer. It seemed I was being accused simply because I was the first one to sell.

“You saw this on TV, and no one else did?” Okada-san’s face scrunched together with doubt, or possibly disgust.

I honestly don't know why I was the only one in the country who saw the news on TV and thought to immediately push the sell button. But, these officials didn’t believe me. How could a young foreigner react faster than all the experienced Japanese stockbrokers? I didn’t give them any of the answers they were looking for.

They were asking me questions in English, which they were quite proficient at. In the event there was anything difficult to translate, my employer had sent a member of our legal team to accompany me. Takeda-san, a gray haired older Japanese man, who I had met a few times within the company, and obviously seemed to think I was far too young to hold a job as a stockbroker.

In the meeting with the SEC, Takeda-san sat beside me. As I made my hundredth denial of possessing any inside information. Okada-san glanced over at him, and speaking Japanese, burst out. “He’s lying. It’s obvious just from looking at him.”

Takeda-san said, “Yes, I think so too. He must be lying. Foreigners, you know, they don’t respect our rules.”

The two of them carried on discussing how I must be dishonest and know something I wasn't telling them.

Having spent two years studying their language and painstakingly reading Japanese novels in my spare time, I followed about 75% of what they were saying.

I couldn’t take it anymore.

“By the way…” I stuttered nervously in Japanese, “I understand Japanese. I don’t know why you are all calling me a liar.” I directed the last part toward Takeda-san, who should have been on my side defending me.

Okada-san chuckled nervously. “We didn’t realize you understood Japanese.” After taking a moment to recover his composure, he shifted into a new line of attack. “Our records show you did not borrow the stock before you sold it.”

“I thought I could borrow it at the end of the day.”

“The regulation states you need to borrow it before you sell it.”

“I did the same thing I have always done at this company. The same thing everyone does.” Did this mean I was always violating the rule?

My ignorance of the local regulations was becoming embarrassing. Stockbrokers in New York or London went through months of licensing exams before they were allowed to trade. In Tokyo, my employer had shifted me from the accounting team to the brokerage team without any training except for a few pointers from my new coworkers.

“He clearly violated the stock borrowing rule,” Okada-san said sternly.

Takeda-san, my chaperone, shifted back into speaking Japanese to sum things up for the regulators. “So, we can see Scott here, is basically an idiot. I don’t know how the foreigners who run this company let a guy like him work in this job. I apologize for letting this happen.” Takeda-san bowed his head.

Apologies are a big part of Japanese business culture, so I let Takeda-san continue with his pitch without interrupting as I lowered my head and tried to look humble each time they agreed with each other that I was an untrained idiot. I mumbled all the formal apologies I knew in Japanese.

**

They continued to ask the same questions, and I told the same answers, every afternoon for another week. In between meetings, they demanded that I produce reports on a vast range of topics for them, and I worked late at night collecting data and printing out their reports. Many of my coworkers also worked late, some until after midnight every night. They were undergoing the same treatment I was.

One day I walked into my dreaded afternoon meeting and detected a shift in the mood. Okada-san, uncharacteristically, was smiling. “Have a seat, Scott. You have convinced us the problem with the Ikeda corp trade was not your fault. Judging from your study of the Japanese language, we can see you are one of the good foreigners, one that appreciates our culture and wants to do the right thing.”

“Yes, that’s right!” I smiled. They had finally recognized my good intentions.

“So, we can stop having these meetings,” he said. “As a formality, if you sign this letter that summarizes what we talked about, this whole matter will be over.”

“Thank you,” I said, nodding respectfully. “All I’ve ever tried to do is the right thing, and I’m sorry for my mistake.”

He handed me a pen. “Sign here.” He pointed toward a blank line on the bottom of the 3-pages of text on A4 paper stapled together while gazing at me calmly. Everyone in the room was very still.

The tip of my pen touched the paper. I prepared to scribble out my signature.

There must have been a micro expression on Okada’s face. A tell. Something felt wrong.

“I always read documents before I sign them,” I said, telling my first bold faced lie.

“You don’t need to read. It’s just a summary of what we already discussed.”

Okada-san motioned again for me to sign. But I had made up my mind and began reading the document. By the bottom of the first page, the letter said I had knowingly violated the security regulations of Japan, took full responsibility on behalf of myself and the company, and was aware of the criminal penalties involved.

“‘Knowingly violated’?” I gasp. “That’s not what you just said.”

He smiled calmly, while my eyes jumped around the printed confession.

“You said I’m one of the good guys. If I sign this, I’m a …criminal.”

The idea of committing a crime sent a chill of terror down my spine. I grew up in a very law-abiding family in Wisconsin. My father was a local bureaucrat. Judges and government administrators came over to our house for dinner parties on the weekends. Any sort of legal problems happened to “other” people, not to us.

Imminent doom raced through my mind. I contemplated the trap these regulators had sprung, and what their intentions were. Probably to record as many penalties as possible to look good to their superiors. It didn’t matter who they incriminated.

“I am not signing.” I sat there speechless and crossed my arms.

Okada-san asked, “What are you prepared to sign?”

His flexibility was a surprise. “I’ll sign exactly what happened. That I unknowingly made a stupid stock borrowing error.”

He pointed at the document. “Show us what lines you need to change.”

We went through the letter sentence by sentence, negotiating the wording of almost every line to change from intentional flagrant violations of securities laws, into admissions of my ignorance and lack of knowledge.

They looked disappointed, but resigned to making a compromise after weeks of not making it anywhere with their investigation.

After signing the document, the letter was filled in their records. I was deeply worried, despite the revisions, but nothing further was to come of it except for additional training requirements for all new brokers.

A week later, I was called to the conference room again. My humiliation wasn’t quite complete.

Okada-san smiled like last time. “You say you are fluent in Japanese. We want to ask you to give a speech on financial derivatives in Japanese to our regulatory staff.”

“Me?” I was only 25-years-old, and had spent weeks exploring the depths of my ignorance in their meetings.

“It would be very educational for us.”

“Do I have a choice?”

He smiled calmly and didn’t answer. I was a pawn. If I didn’t cooperate, they would pressure my bosses to make me.

A week later I stood in front of an audience of Japanese government officials and gave a speech in Japanese, stumbling over my words, while a hundred sets of eyes studied me closely and took notes. After I finished, they clapped politely for a few seconds. Then another stockbroker from my firm took the stage, and began his 15-minute display of deference to the Japanese government for whatever mistake he had made.

I was in their country. I was under their thumb. Trading stocks was not a computer game but a job that had consequences. I vowed to learn all their local rules and not to make the same mistake again.

Epilogue:

During the 2-month inspection, the stress put on everyone involved was intense. One Japanese broker died of a heart attack, one passed out and fell down an escalator out of exhaustion, and several resigned. The pressure put on Japanese employees was worse. They were treated as traitors working for the enemy.

The Japanese government raided every foreign financial firm after a scandal in which a famous Japanese corporation lost an embarrassingly large sum of money to Credit Suisse. Within a few years of conducting these inspections/shake-downs, the Japanese government would soon dictate what business foreigners could and could not do within their country, without ever having to create a new law or win a court case. The country regained face.