Japanese Manager Held in Theft of Billions : Scandal: News that a former credit union official allegedly forged $2.5 billion in deposit certificates was another blow to the nation’s financial system.

Japan’s scandal-tainted financial world reeled from another fraud tale Tuesday, this time the arrest of a former credit union manager accused of forging $2.5 billion in deposit certificates.

The already depressed stock market stumbled on news of the scandal, the largest so far in a spate of questionable dealings surrounding Japanese banking. Analysts said the alleged fraud, if true, also raised profound questions about the ethics and management in Japan’s powerful banks.

The Nikkei average closed at 22,872.00, down 113.67, or 0.49%, on the Tokyo Stock Exchange.

“The news of another financial-related scandal really discouraged the market mood,” said Masami Okuma, general manager of stock trading at UBS Phillips and Drew International. “Investors felt fed up.”

Osaka’s Toyo Shinkin credit union said it fired branch manager Tomomi Maekawa, 58, on Monday and contacted prosecutors after learning he had issued 13 fake deposit certificates worth a total of $2.5 billion (342 billion yen) to a restaurant owner, Nui Onoue.

Prosecutors said Onoue used the certificates to obtain huge loans from more than 10 other financial institutions.

The loans totaled more than 300 billion yen ($2.2 billion) and were used to cover stock-trading losses, Kyodo News Service reported.

Japan’s top long-term credit bank, the Industrial Bank of Japan, was among the banks that supplied loans to Onoue. Bank officials said they unknowingly accepted a falsified deposit certificate as collateral because it bore proper signatures and seals.

“We were shocked to hear about the forging of certificates by a Toyo Shinkin employee,” Industrial Bank of Japan Managing Director Koichi Maeda said. “We also have become one of the victims of the scandal.”

The Japan Broadcasting Corp. said Onoue deposited relatively small amounts of money in the credit union and Maekawa issued blank deposit certificates in return. Maekawa and Onoue then wrote in much larger amounts of money on the certificates, it said.

It said Toyo Shinkin first learned about the falsified documents from another financial institution Aug. 8.

Prosecutors said they arrested Maekawa and Onoue but had not charged them.

Traders said Onoue, 61, is widely known as a semiprofessional stock investor who conducted large deals and held shares of more than 10 top companies, including banks and transportation firms.

She reportedly held 3.2% of the outstanding shares of Chugai Ro, Japan’s leading maker of industrial furnaces.