Yoshiaki Tsutsumi, who once topped the list of the world's richest people, was arrested Thursday over a stock fraudulence.
Japanese prosecutors allege that Tsutsumi violated the Security and Exchange Law by playing a role in understating equity stakes held in Seibu Railway Co. by Kokudo Corp. Tsutsumi formerly headed.
The 70-year-old tycoon was holding the top position on the Forbes' richest people list for four consecutive years from 1987 to 1990 in midst of Japan's economic bubble.
In a statement submitted to authorities in June, Kokudo said it owned about 43 percent of shares in Seibu Railway, about 20 points lower than the real status, Japanese media quoted sources as saying.
Tsutsumi acknowledged the false statement in October and resigned from all the posts he held in Kokudo.
In addition, the 10 top Seibu Railway shareholders held more than 80 percent of the shares when the statement was delivered, a violation of Tokyo Stock Exchange rules, the reports said.
Tsutsumi and other Kokudo executives secretly sold a total of 56.65 billion yen (540 million US dollars) Seibu Railway shares from August through October to other companies in order to avoid Seibu Railway's delisting from the stock market, which was also illegal.
Tokyo-based Kokudo operates the Prince Hotels chain and sports facilities. It is the center of a business group that includes Seibu Railway and other companies.
Tsutsumi's fortune culminated in 1987 when his net worth was estimated at 20 billion dollars by the Forbes magazine. However, he dropped to 159th on the 2004 lit with 30 billion dollars as his businesses were caught in trouble.