TOKYO (Reuters) - The president of Japan's Universal Entertainment Corp (6425.T) said the company's founder Kazuo Okada is "unfit" to be the director of a public company, in a private letter to a shareholder seen by Reuters.
The June 21 letter was written by Jun Fujimoto ahead of an annual meeting of Universal shareholders on Thursday at which Okada lost his position as board chairman. Shareholders approved a slate of directors that did not include Okada, a company spokesman confirmed. The meeting was not open to the media.
The board shake-up comes three weeks after Universal announced that it had established an internal investigative panel to probe Okada’s use of company money. Universal said it had found three cases in which Okada misappropriated a total of $20 million in funds.
Okada addressed those allegations for the first time on Thursday on the sidelines of the meeting in a Tokyo hotel. Okada made the comments after being told he could not attend the meeting because his stake in Universal is held indirectly by a holding company.
"I've done nothing wrong," Okada told reporters. "I've been barred from the meeting in the name of this investigative panel and allegations that are a bunch of nonsense."
Universal said it could not comment on letters to or from Fujimoto as an individual and declined to make him available for an interview.
Peppered with criticism of Okada, the letter offers a glimpse into the mindset of Fujimoto, 59, as he pushes ahead with an attempt to sideline Okada, 74, in a rare Japanese boardroom coup.
"I think Chairman Okada is unfit to be in management of a public company," Fujimoto said in the letter, which was written in Japanese. "I'm confident that I can prove that with irrefutable physical evidence." He did not say what that evidence was.
The approved slate of directors included Okada's wife, Takako. Universal also brought back a former finance executive and added an external director to the board.
Those changes were made possible by the resignation of Okada in May as director of Okada Holdings Ltd, a company based in Hong Kong that owns 69 percent of Universal's stock and therefore holds sway over appointments to Universal's board.
Okada stepped down as the result of a rift with family members, who control a majority of Okada Holdings' stock, Reuters reported on Wednesday.
Fujimoto was responding to a letter from shareholder Tsuyoshi Hosoba, who had unsuccessfully sued Universal directors in 2015 alleging they breached their fiduciary duties on a series of matters, including in relation to $40 million in payments from affiliates of Universal in 2010 to a Philippine consultant, who was working on the company's $2.4 billion casino on Manila Bay.
Okada, Fujimoto and Universal have denied any wrongdoing related to the payments, which have been the subject of regulatory scrutiny in the U.S. and the Philippines.
Hosoba declined to comment. In his letter, Hosoba said he wanted to work with Fujimoto to "clean up" the company and offered to cease further legal action if Fujimoto "told the truth" about the payments and took steps to bolster corporate governance.
In response, Fujimoto rejected Hosoba's request to cooperate but urged him to consider the steps he was taking to improve the company's compliance and the risks directors and executives were taking in investigating the "extremely powerful" Okada. Fujimoto criticized Hosoba's threat of legal action as misguided.
In the letter, Fujimoto said the investigation into Okada would look at transactions going back five years. That means the review would not include the $40 million paid to the Manila-based consultant in 2010.
The U.S. Federal Bureau of Investigation has been probing the $40 million to determine if it was aimed at helping Universal gain tax and ownership concessions for its casino in the Philippines, according to the people with knowledge of the probe.
Universal and Okada filed a defamation lawsuit against Reuters in 2012 for its reporting on the payments. The Tokyo District Court ruled in 2015 that Universal's case was without merit. Last year the Tokyo High Court upheld that ruling, dismissing Universal's appeal. Universal has appealed to the Supreme Court of Japan.
Editing by Bill Rigby and Lincoln Feast