Naoki Kumagai, the former VP of dairy products giant Yakult Honsha Co, was sentenced to seven years in prison by the Tokyo District Court yesterday [Thursday], after he was found guilty of engaging in illicit transactions of “Princeton bonds”.

Seventy-two-year-old Kumagai pleaded guilty to evading tax payments on the bond transactions, but pleaded not-guilty to charges of aggravated breach of trust and fraud, for which he was convicted and fined ¥60m. Prosecutors had demanded the Kumagai face an eight-year prison term and a ¥70m fine.

Between 1995 and 1997, Kumagai allegedly received rebates worth ¥530m from Akira Setogawa, the chairman of the Tokyo branch of securities house Cresvale International, after Yakult purchased “Princeton bonds” from the brokerage. In concealing this income, he dodged income tax amounting to ¥245m.

The court said that Kumagai also embezzled ¥700m from Yakult's Hong Kong-based affiliate between 1991 and 1998 and overstated the firm’s income in its April-September 1997 interim earning reports.

The scandal was extended to Yakult as the fermented lactic drinks producer was fined ¥10m for corporate culpability in falsifying its 1997 earnings report (a violation of the Securities and Exchange Law) and failing to stop Kumagai’s fraud.

Presiding Judge Kohei Ikeda told the court that Kumagai’ greed had tarnished the later part of his life.

Kumagai’s lawyer told the Japan Times that he plans to appeal the ruling.