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Nikko Asset Management faces suit alleging manipulation of incentive scheme

Nikko Asset Management Co. Ltd. and President and CEO Takumi Shibata are facing accusations that they manipulated an incentive plan involving employee stock acquisition rights under schemes rolled out after Sumitomo Mitsui Trust Bank Ltd. bought the asset manager from Citigroup Inc. in 2009, the Financial Times reported Oct. 12.

Seven former executives of the Japanese company have filed a lawsuit in the Southern District of New York alleging that Shibata devised a scheme to make the instruments worthless by valuing the company at less than the strike price.

Shibata then allegedly told the executives, which include former chairman and CEO Tim McCarthy, ex-president and chief investment officer Billy Wilder, as well as former CFO Fred Reidenbach, in 2015 to either sell their stock acquisition rights back to the company for virtually nothing or forfeit them altogether.

The stock acquisition rights were issued to allow holders to benefit from an increase in the value of Nikko Asset Management in the event the company did not carry out an initial public offering over the next 10 years.

The former executives submitted a claim for more than US$100 million in damages. They claim that the asset manager misappropriated tens of millions of dollars, as well as allowed the company to formulate a new incentive plan designed to benefit Shibata personally.

According to the suit, the claimants said Shibata selected three evaluators — Tokyo-based Plutus, UBS AG and PricewaterhouseCoopers — and provided them limited information. Their estimates fell short of the strike prices in two separate but similar plans created in 2009 and 2011.

The three firms valued Nikko Asset Management at ¥617 per share, below the 2009 plan's ¥625 strike price and the 2011 plan's ¥737 strike price.

No date has yet been set for the court case, while the defendants, including Shibata, Nikko Asset Management, Sumitomo Mitsui Trust Bank and parent Sumitomo Mitsui Trust Holdings Inc., are contesting the lawsuit.

Plutus did not respond to requests for comment, while USB and PricewaterhouseCoopers declined to comment. Nikko Asset Managment, Sumitomo Mitsui Trust Bank, Sumitomo Mitsui Trust Bank and Shibata also declined to comment on the matter, the report noted.

As of Oct. 11, US$1 was equivalent to ¥112.21.