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 You are in: Home > Business> World Business Archive
World Business Archive
Broadcast 27th July 2000
Listen to the interview with Ron Bevaqua

The 88-year-old former chairman of the Japanese department store Sogo, is to be held personally liable for the chain's $100 million dollar debts.

Sogo's largest creditor, the Industrial Bank of Japan, said it would go to court to seize the personal assets of Hiroo Mizushima if he refused to settle.

A spokesman claimed the Bank had only lent money to Sogo, because of the assurances of Mr Mizushima.

According to Tokyo economist Ron Bevaqua, holding top executives responsible personally for a business failure remains widespread in Japan, as he explained to our reporter Roger White:

"Someone has to take responsibility. Mr Mizushima was a banker, he was with the Industrial Bank of Japan, one of the premiere institutions in the post war growth phase, originally a government financial institution that was then privatised. He moved over to Sogo and that connection was one reason why the IBJ, the Industrial Bank of Japan, was the biggest creditor to Sogo in the first place.

"Mr Mizushima basically took the retailing business and turned it on its head. The strategy he pursued was actually one of real estate development because, even before the bubble period in the mid-1980s land prices in Japan were always going up.

"He basically viewed the retail business as a real estate business and there was a lot of investment in real estate which worked wonders through the 1980s. At one point Sogo had the biggest department stores in the world but obviously, when the Japanese bubble collapsed and land prices collapsed, that strategy collapsed as well."

Sogo had the biggest department stores in the world, but when the Japanese bubble collapsed and land prices collapsed, that strategy collapsed as well. Ron Bevaqua

"Sogo’s problems came about because they did not manage their stores that well to begin with, but they made things much worse by investing in real estate that halved in value over the last ten years. It was Mr Mizushima's strategy, it was his connection with the Industrial Bank of Japan which provided the financing, so of course, in the end he is responsible.

"Now of course he is in his 80s and we have seen this kind of thing before, where he will be taking responsibility, he will have to step down from what ever position he had. There may be some sort of legal action against him but, it will almost certainly drag through the courts for years."

Roger White asked if they really would go after Mr Mizushima to try and make him personally bankrupt?

"Some of the more seedy tabloid newspapers headlines, just after the Sogo bankruptcy, were saying that he had millions and millions, maybe hundreds of millions of dollars in assets in bank accounts around the world. That has also, been one reason why they have focused on him. Not only was he responsible for the strategy but he seems to have lined his pockets at the same time."

Industrial banks seemed to have lent a lot of money to Sogo because of Mr Mizushima's personal guarantee. Was that the way things normally happened in Japan? Roger White inquired.

"That is exactly the way. That is the problem with the Japanese economic model: it is based on relationships. Again remember, he was a career IBJ banker and when he moved over to Sogo that connection was what was able to provide Sogo with the finances necessary to go out there and buy all this real estate."

It was Mr Mizushima's personal guarantee which helped to finance Sogo’s expansion and ultimately financed a bankrupt business strategy. Ron Bevaqua

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