A leading consulting company suspected of having misused money intended for official development assistance to Costa Rica created fictitious receipts in misappropriating about 50,000 dollars (about 5 million yen) of the money, a Japan International Cooperation Agency investigation revealed Tuesday.

JICA has decided to demand that Pacific Consultants International pay back about 170,000 dollars in missing money, including the 50,000 dollars, and will suspend the firm from bidding on ODA contracts for six months.

It is rare for JICA to impose such a suspension or to demand for the return of ODA project money in cases such as this. The agency reportedly intends to investigate the case further with an eye to lodging criminal charges against PCI.

The ODA project was drawn up to conduct a survey for agricultural development in the northwestern part of Costa Rica. In October 2000, PCI, the nation's largest consulting firm for overseas operations, won the 423 million yen ODA contract. The Tokyo-based company then subcontracted part of the survey work to the Instituto Geografico Nacional de Costa Rica (National Geographic Institute of Costa Rica) for about 231,000 dollars, but most of the money was not paid to the Costa Rican government body.

About 200,000 dollars supposedly used for the survey project was unaccounted for.

After JICA dispatched senior officials on a fact-finding mission, 58,000 dollars was paid into the institute's bank account, leaving the total amount of money unaccounted for at 173,000 dollars.

In addition, PCI was found to have forged receipts using the signature of a fictitious person.

Asked about JICA's findings, the company admitted it had misappropriated the ODA money. One company official said, "We failed to pay the National Geographic Institute 49,000 dollars."

But the official also said, "We used the money for transportation and organizing seminars necessary for the survey project."

But PCI disposed of all its accounting data, so there are no documents to support this statement. The whereabouts of the rest of the missing money is unknown.

The Costa Rican judicial authorities are reportedly continuing their own investigation into the case. JICA may consider filing a criminal complaint against the company depending on the results of the investigation, according to sources.

Earlier, JICA had levied a two-month bidding suspension on the company beginning on Sept. 15 over problems with the way it had paid commissions to the subcontractor.

In late September, the Japan Bank for International Cooperation and the Foreign Ministry, both of which oversee loan assistance for ODA projects, also hit PCI with a two-month suspension from participating in ODA bidding. Following the new revelation, the two institutions also reportedly plan to impose additional penalties on the company.

Tokyo-based major consulting firm Pacific Consultants International embezzled more than 100 million yen by padding expenses for official development assistance projects in 12 countries, sources close to the Board of Audit said Thursday.

Since PCI has already been found to have inflated bills for ODA projects in four other countries, including Costa Rica, in Central America, it appears that the largest consulting firm providing services for overseas projects embezzled a total of 140 million yen from ODA projects for 16 countries.

The Japan International Cooperation Agency, which awarded the projects to PCI, will ask the consulting firm to return the embezzled funds. Since JICA has already removed PCI from the list of companies allowed to bid for its projects for 18 months to March, it will not mete out further penalties against the firm.

The House of Councillors Audit Committee asked the board to inspect PCI after The Yomiuri Shimbun reported on the firm's irregularities.

The board, which submitted a report to the committee Thursday, investigated the 86 projects subcontracted to companies in 52 countries by PCI, which was awarded them by JICA and Japan Bank for International Cooperation between fiscal 2000 and fiscal 2004.

According to the board, irregularities were found in 13 projects worth 2.79 billion yen in 11 countries, including Brazil, Colombia, Laos and Turkey.

The board discovered that PCI had submitted fake contracts with costs higher than the amounts listed in subcontracts and fictitious subcontracts for projects it had not farmed out to local companies.

PCI embezzled 103.65 million yen in 36 cases by submitting fake reports, the sources said.

At the behest of the commission, JBIC conducted an internal probe that revealed that PCI also padded invoices by 4.71 million yen for two projects worth 126 million yen in Indonesia.

PCI has already returned the money to the bank.

In the latest controversy involving Japan's official development assistance program, The Yomiuri Shimbun has learned that water wells built in southern Laos under the ODA program cost 10 times more than similar wells built in that country by a Japanese company as a goodwill gesture.

Meanwhile, a survey by the Finance Ministry has revealed that cost estimates were not done before numerous overseas technical assistance projects were undertaken by the Japan International Cooperation Agency.

Critics have said that Japan's ODA programs are too costly, and that the well projects and the survey indicate that overseas aid programs are often implemented without proper attention paid to cost-efficiency.

The wells at issue were constructed in Champasak and Salavan provinces in Laos under grant-in-aid programs from fiscal 1997 through fiscal 2000 to provide water for daily use for local residents. There were 305 wells built in total. For those wells, which are 50 meters deep on average, overall project costs totaled 1.32 billion yen. The construction was undertaken by a major Japanese boring company.

The construction costs, excluding spending on hand-operated pumps and other machine parts, totaled about 600 million yen. The unit construction cost per well therefore stands at about 2 million yen....more...

Japan is vowing to keep a more careful watch over Japanese companies involved in carrying out the country's overseas development assistance. VOA's Steve Herman reports from Tokyo the pledge follows a series of financial scandals involving Japanese foreign aid. Five Japanese companies were suspended earlier this year for either one or two months from bidding on new projects, after they were accused of corrupt or fraudulent practices in such places as Bolivia, Papua New Guinea, and the Pacific island nation of Kiribati. All five companies are again eligible to bid for official Japanese projects. A sixth company, Pacific Consultants International, is also back in the good graces of the Foreign Ministry and the Japan International Cooperation Agency (JICA). Pacific Consultants International was suspended from bidding on new projects for 18 months through March of this year, after it was found to have embezzled $1.5 million in connection with development projects in at least 16 countries. Japan International Cooperation Agency President Sadako Ogata says an internal agency investigation uncovered the fraudulent billings by Pacific Consultants International.

"It is a big consulting company and it has done a lot of good work," said Ms. Ogata. "But they do re-commission that work to smaller companies, and in that process there was a lot of undesirable losses and ineffectiveness that was discovered. And they are actually already reimbursing quite a lot of the losses to JICA." The Foreign Ministry revealed Friday that since the lifting of the suspension, Pacific Consultants International has been awarded 18 contracts worth $6 million, through JICA and the Japan Bank for International Cooperation. Foreign Ministry spokesman Tomohiko Taniguchi acknowledges the ministry has been reprimanded for not properly supervising billions of dollars worth of aid. "The Board of Audit made a warning to the Ministry of Foreign Affairs that the ministry has to take far greater care of the details of the contracts so that never again this sort of fraudulent activity will be conducted by the contractors," he said. Japan, which annually dispenses $6.5 billion worth of assistance to other countries, is the world's second-largest foreign aid contributor after the United States.

A former senior official at a consulting firm at the center of a high-profile fraud case has told prosecutors it tried to bribe foreign public servants to help it get orders for official development assistance projects, sources said Thursday.

In questioning by the Tokyo District Public Prosecutor's Office, the former official of Pacific Consultants International said the firm remitted several hundred million yen to a Hong Kong company affiliated with a former PCI director in 2004 or later, the sources said.

Nominally, the money was allocated as "field research" expenses but intended to be handed to high-ranking Southeast Asian government officials via local agents as a way of expediting PCI's lobbying for Japanese ODA projects, the sources said.

The former senior official and others had worked out the fraud scheme by October 2003. Under the scheme, they decided to use money from the next year to smooth PCI's ODA business. PCI is one of Japan's leading consultants for ODA-related projects.

Prosecutors have seized a memo from a PCI board meeting in 2005 referring to the shady money.

Bribing foreign public servants is prohibited under the unfair-competition law.

Prosecutors will investigate whether the money was actually given to foreign government officials in connection with ODA projects and whether some of it was funneled back to PCI officials, the sources said.

Four former senior PCI officials were arrested Wednesday on charges of causing 120 million in damage to the firm in connection with a chemical weapon disposal project undertaken in China under the ODA framework.

TOKYO (AP) -- Five Japanese company officials were arrested for alleged fraud in a widening scandal over a government project to remove chemical weapons abandoned in China at the end of World War II.

The five from consulting firm Pacific Consultants International and its affiliate, Abandoned Chemical Weapons Disposal Corp., are accused of swindling about 140 million yen (US$1.1 million) from the Japanese government, the Tokyo District Public Prosecutor Office said in a statement.

Relations between Beijing and Tokyo are sensitive because of Japan's invasion and brutal occupation of much of China in the 1930s and '40s. Japan is required to clean up its abandoned weapons under a 1997 international chemical weapons convention.

Since 2004, the Japanese government has disbursed 23 billion yen (US$222 million) to help dispose of 400,000 chemical weapons that retreating Japanese troops left in northeast China at war's end.

China says poisons leaking from the abandoned weapons have killed about 2,000 people since 1945, compounding enduring resentment toward Japan's occupation.

In 2004, Pacific Consultants International established Abandoned Chemical Weapons Disposal Corp. as the sole agent to manage the government project.

But the project is far behind schedule, with only 10 percent of the poisonous shells and canisters recovered. Japan has been forced to extend the deadline for completing the disposal by five years to 2012, and work on a disposal plant has not even begun.

The project also faces opposition from Japanese conservatives who defend the country's wartime aggression in Asia and question the authenticity of the abandoned weapons.

Four other executives, including Tamio Araki, former president of Pacific Consultants International, were arrested in April in the case.

Northeast China was a hub of Japan's wars in Asia, and Tokyo used the area to stockpile its chemical weapons.

In 2003, one person was killed and 43 others were injured when construction workers broke open a buried barrel of poison gas in the northeastern Chinese city of Qiqihar.

A former president of a consulting firm at the center of a high-profile fraud case has told prosecutors that he used part of illegally earned public money to bribe foreign public servants to help the company obtain orders for official development assistance projects, according to investigative sources.

In questioning by the Tokyo District Public Prosecutor's Office, Masayoshi Taga, 62, a former president of Pacific Consultants International, admitted he used the money to bribe high-ranking Southeast Asian government officials as a way of expediting PCI's lobbying for Japanese ODA projects, the sources said.

Taga was served a fresh arrest warrant Tuesday on suspicion of swindling the government out of 140 million by overcharging for a government project awarded in fiscal 2004 aimed at disposing of chemical weapons abandoned by the Imperial Japanese Army in China at the end of World War II. He was arrested in April on suspicion of aggravated breach of trust in connection with the project.

According to Taga, who was then the PCI board director in charge of weapons disposal operations, he was instructed by his superior, former PCI President Shota Morita, 66, to use part of the illegal money to bribe foreign public servants to smooth PCI's ODA business, said the sources.

Taga told the prosecutors he used the money as told, the sources said. Morita was earlier indicted over alleged breach of trust in connection with the disposal project.

A former senior PCI official earlier told the prosecutors that the consulting company remitted several hundred million yen to a Hong Kong company affiliated with a former PCI board director in 2004 or later, the sources said.

The money was nominally allocated as "field research" expenses but handed to government officials via local agents.

Prosecutors served a fresh arrest warrant Thursday on a former president of major construction consultant Pacific Consultants International for allegedly evading income tax as a way to raise funds to bribe foreign officials.

The aim was to win contracts related to overseas development projects financed with low-cost loans from the Japanese government, the prosecutors alleged.

Ex-PCI President Shota Morita, 66, was first arrested April 23 for allegedly causing financial damage to his firm over a project to dispose of chemical weapons abandoned by the Imperial Japanese Army in China during the war.

Also Thursday, Tokyo District Public Prosecutor's Office investigators arrested Yukio Watanabe, 58, a PCI board member, as an accomplice of Morita in the tax evasion.

The prosecutors said they also searched PCI's head office in Tama, western Tokyo, Watanabe's home and several other PCI-linked locations.

PCI sources earlier alleged that the firm remitted 100 million to 200 million a year to a Hong Kong-based business firm, with which a former PCI executive was involved, as funds to win favor from foreign government officials in connection with Japanese-financed development projects.

The former executive, whose identity has been withheld, allegedly gave the money to agents as funds to bribe officials in Southeast Asia, the PCI sources said.

The prosecutors apparently concluded this money was not related to expense accounts and instead was undeclared income taxable in Japan, investigative sources said.

Morita served as PCI president for about a year starting in December 2004. Watanabe is a PCI board member in charge of financial affairs.

Morita and Tamio Araki, 72, also a former PCI president, have been charged with aggravated breach of trust under the Commercial Code for allegedly causing damage to PCI of around 120 million in connection with the Japanese government's chemical weapons disposal project in China.

Masayoshi Taga, 62, another former PCI president, has also been indicted on fraud charges for allegedly swindling the government out of 140 million by overcharging the Cabinet Office in connection with the weapons project.

PCI is one of the largest consultancies in terms of order receipts involving official development assistance projects.