Top Prudential salesman nabbed over insider trading

The special investigation unit of the Tokyo District Public Prosecutors Office on Thursday arrested an employee of Prudential Life Insurance Co. and a former executive of another firm on suspicion of making 40 million through insider trading.

One of the men arrested was Hiroaki Denda, 35, an employee of Prudential Life Insurance in Chiyoda Ward, Tokyo, according to investigative sources. The other was Hisashi Watanabe, a 35-year-old former executive board member of a firm affiliated with Tele Wave, now called SBR, a Tokyo-based information technology company listed on the JASDAQ market, the sources said.

Both were arrested for allegedly violating the Financial Instrument and Exchange Law.

In the middle of November 2006, Watanabe allegedly learned from a Tele Wave employee that the IT firm was going to revise downward its earnings estimates for its midterm net profit in the consolidated accounts for the business year ending in March 2007. The estimate was to be reduced to 217 million from the original forecast of about 1.3 billion.

Between Nov. 15-20 -- shortly before the firm officially announced the revision on Nov. 20 -- Watanabe sold Tele Wave shares for 70 million. Denda sold shares in the firm for 44 million, allegedly in conspiracy with Watanabe.

These transactions were conducted through a short-selling scheme that enabled the men to sell shares they did not actually own but borrowed from brokers. They later bought back the shares after the stock price fell.

Tele Wave's stock price dropped sharply after the downward revision was officially announced. The closing price on Nov. 20 was 168,000, but it fell as far as legally allowed on the following two days. In December it fell below 80,000.

According to the sources, the Prudential employee is one of the company's top salesmen of insurance, with an annual income of more than 100 million.