Japan Officials Getting Away With Bribery

[Mulboyne]

FT: Tokyo rapped over stance on bribery
Japan has made little effort to combat bribery of foreign officials involved in international business transactions, according to a damning report released yesterday by the Organisation for Economic Co-operation and Development. The OECD said no case of bribing a foreign official had been investigated formally in Japan, despite several allegations in the press involving Japanese companies. Reports of such abuses often allege misappropriation of Japan's overseas development aid (ODA). The OECD also said the government - claiming secrecy - had failed to provide the organisation with sufficient information for it to assess Tokyo's implementation of an accord aimed at combating bribery, which Japan adopted in 1999....In one instance, the Japanese police refused last July to provide the OECD with information on its investigative techniques, Mr Moulette said. As a result the OECD team was taking the "extraordinary" step of conducting one more on-site evaluation in Japan next January, a first for any country.
Two years ago Mitsui, the trading house, came under the spotlight for allegedly bribing a government official in Mongolia in order to win a contract to build power-generating facilities there, a project funded by the ODA. Although three officials were arrested and two were charged, none was prosecuted for bribing a foreign public official. Takayuki Sumita, director of the intellectual property policy office at the Ministry of Economy, Trade and Industry, said: "It is not that Japan has been lax in enforcing our laws; it is that sometimes our definition of offences can be different, owing to cultural and other differences. We will consider the OECD's recommendations seriously."

[Mulboyne]

[Captain Japan]

Japan has made little effort to combat bribery of foreign officials involved in international business transactions...

I remember around the time of the Muneo Suzuki meltdown a guy my construction company had dealings with was accused of bribing a Mongolian official in order to get a project. Basically, the company the guy worked for was also mixed up in the Muneo mess in Russia and the Japanese government needed to pretend that it was rooting out corruption everywhere - even in far off lands like Mongolia. My boss asked me to print out all the news stories in English on the matter. I remember reading one that quoted the poor sucker saying something like: "As far I know, I didn't do anything wrong." The story said he handed over something like 18k dollars to a Mongolian minister. But as I read his quote, I believed him. Bribery, corrution, etc. is how business is done. There is no other option.

[Captain Japan]

"It is not that Japan has been lax in enforcing our laws; it is that sometimes our definition of offences can be different, owing to cultural and other differences. We will consider the OECD's recommendations seriously."

I suppose there will come a day when this standard excuse doesn't work anymore. When that will be, however, I have no idea.

[dimwit]

I think in general, most OECD governments are far more corrupt when it comes to ODA than they are domestically.

[Mulboyne]

Kyodo via Yahoo: OECD demands Japan address bribery of foreign public officials

The Paris-based Organization for Economic Cooperation and Development issued a report Thursday calling on Japan to become more aggressive in investigating and prosecuting the bribing of foreign public officials and toughen the legislative framework to counter such practices. The demands were primarily based on concerns over the possible bribery of foreign public officials by Japanese corporations to win contracts in connection with Japan's official development assistance programs or public works projects by foreign governments. In the report, the OECD called on Japan to assess legal and procedural blocks that thwart its effective investigation and prosecution of foreign bribery and to submit findings to the organization within six months.

It also demanded that Japan take a clearer stance on the issue by moving a clause criminalizing the bribery of foreign public officials from the Unfair Competition Prevention Law to the Penal Code. Last year, the OECD also called on Japan to address its situation after finding that the country had made insufficient efforts to enforce the OECD Convention on Combating the Bribery of Foreign Public Officials in International Business Transactions. The OECD was reviewing Japan's compliance from February based on its conclusion that Tokyo did not cooperate enough during a field review it conducted in the country in 2004.

[kamome]

Kyodo via Yahoo: OECD demands Japan address bribery of foreign public officials

From the Japanese perspective, this all appears like Western imperialism. It wouldn't surprise me that prosecutors and officials resent the attempt to change their domestic laws.

[Mulboyne]

From the Japanese perspective, this all appears like Western imperialism. It wouldn't surprise me that prosecutors and officials resent the attempt to change their domestic laws.

I don't think that is the Japanese perspective on this. It would certainly be a poor refuge for Japan to seek. The majority of parties to the Convention have adopted the foreign bribery offence into their legal code including Australia, Bulgaria, Finland, Finland, France, Hungary, Italy, Iceland, Norway, Mexico, Switzerland and Luxembourg. All of these countries have also made it an offence to bribe a domestic public official. Canada, Greece, Germany, the US and Korea have enacted specific legislation to establish the offence. The UK and Japan established the offence in a statute other than the penal code. For Japan it is contained in the Unfair Competition Prevention Law which primarily addresses unfairness in relation to intellectual property. The domestic bribery offence is in the penal code because Japan maintains it is an issue of public trust rather than just fair competition. As a result, Japan is the only party to the Convention who have had their choice of statute questioned by the OECD and they note that there have been no formal investigations or prosecutions since it was established in 1999. They are the only country to be subject to a follow-up by the working group.

METI guidelines define international business as "business repeatedly and continously" conducted for the "purpose of profit." You could drive a coach and horses through that loophole which the OECD has asked Japan to rectify. The guidelines are also vague on whether facilitation payments are outlawed in Japanese law.

What you have is another example of Japan signing up to an international commitment without the first idea of how to implement it in the domestic legal framework. For more, you can see the OECD site on Bribery in International Business which has the recent report on Japan here (PDF). It's not all bad news for Japan and clearly shows that some departments are doing their best to comply while others are just as keen to obstruct them.

[mr. sparkle]

Bribery in business and government as it relates to international business is a fascinating topic. As you guys say, it's really part of their culture to engage in bribery, "gift giving" or whatever you want to call it.

In college, I studied international marketing for 2 semesters with a 2-time Fullbright Scholar and African specialist, Dr. Jeffrey Fadiman. One of the main things I learned from him is that you have to learn how to bribe (if you have to) without breaking the law.

Fascinating dude, great class.

Here's a link to his syllabus:
http://www.jefkata.com/green133b.html

Japan and bribery related stuff you read/research in the class:

How to do Business with Japanese Men: Wilen and Brannen
First Steps on Landing II: How to cope with Bribery. (India)
Product Presentation I: From Shikata to Wa: Selling in Japan
Product Presentation II: Japanese decision-making: How to work with a Japanese Firm
Business Otsukiai: A guide to Japanese Business Protocol (from JAF)

He's got a new book:
"South Africa's 'Black Market'-How to do Business With Africans"
http://tinyurl.com/pt478

He's written for other stuff too in relation to bribery in international business:
Chapter: "Overseas Bribery." Accepted for publication in "Encyclopedia of Business," Gale Research, Inc., Detroit, K. McGrath, ed., EDP, 1995.

Refereed Journal Article: "A Traveler's Guide to Gifts and Bribes," Special Report, Harvard Business Review, June-July, 1986. Republished, Borzoi College Reader, Borzoi Press, 1988.

Refereed Journal Article: "Non-Western Business Interactions: Making Use of the Communal Sphere," World Communications, (Journal of World Communications Association), Vol. 16, October, 1987.

"Teach Me To Bribe (and Be Bribed) Overseas," article, currently submitted to Harvard Business Review.

I'm probably the only Film Major to ever minor in International Business at SJSU. But nowadays, I actually think it's a good combo.

[cstaylor]

Japan should agree to the bribery regulations as soon as America and England shut off Echelon and stop passing foreign trade secrets to American competitors.

[Greji]

Japan should agree to the bribery regulations as soon as America and England shut off Echelon and stop passing foreign trade secrets to American competitors.

Being in business in Japan, I found it very offensive that FGs outside of Japan would like to make a mockery out of domestic Japanese business. It's all on the up and up.

Excuse me I don't have a lot of time to post as two guys just walked in with non-descript brief cases and they may about to be awarded our latest contract, as soon as I review the, ahh, paperwork in their briefcases. Must dash, but don't beleive those OECD scrubs, it's business as usually and almost all, perfectly honest.

Don't worry about Echelon. We are tapping the system

[mr. sparkle]

What's Echelon?

[Taro Toporific]

What's Echelon?

It's a euro-vacuum cleaner.

[Mulboyne]

They have found someone to throw to the wolves:

Yomiuri: Bridgestone 'paid 150 mil. yen in bribes'

Bridgestone Corp. may have given about 150 million yen in bribes to government officials of countries in South East Asia and Central and South America in return for a total of 20 deals for the firm's marine hoses and other products beginning in 2003, according to recently released results of the firm's in-house inspection. The firm is alleged to have formed an international cartel in the sale of the hoses, which are used to transfer oil from tankers to storage facilities. The major tire and chemical products manufacturer reported the results of the inspection to the Tokyo District Public Prosecutors Office on Tuesday as the bribes are highly likely to have violated the Unfair Competition Prevention Law. The law bans the bribing of foreign government officials to gain unfair advantage in business deals. According to the firm, when it made public details of the deals with governments in the countries of these regions, several percent of the value of each deal was added to commissions paid to local agents through Bridgestone's overseas arms. The inflated part of the commissions are suspected to have been handed to officials from governments and other official bodies.

Such acts are suspected to have been conducted in deals for marine hoses, fenders to protect vessels' sides, inflatable rubber dams and other products, all handled by Bridgestone's International Engineered Products Department. Bridgestone's sales of the three products average about 9 billion yen a year. The firm said about 10 employees in the department were suspected to have been involved in the acts. The inflated payments were officially approved by division chiefs and the head of the department as "extra commissions," Bridgestone said. The firm refused to disclose where each of the inappropriate payments specifically went, but said the payments were made in return for purchases of the firm's products or other favorable treatment.

According to the firm, the inappropriate payments are suspected to have begun more than 15 years ago. In connection with the alleged international cartel over the sale of marine hoses, Japanese, U.S. and European authorities launched a joint investigation in May. The U.S. Justice Department arrested the then head of Bridgestone's International Engineered Products Department. The Fair Trade Commission plans to punish five firms in Japan, Britain, France and Italy, including Bridgestone. Bridgestone launched an internal inquiry with the help of Japanese and U.S. lawyers in response to the discovery of the international cartel.

[Greji]

They have found someone to throw to the wolves:

Yomiuri: Bridgestone 'paid 150 mil. yen in bribes'

The last paragraph tells the whole story. If it weren't for that, we would have never heard about it!

[Mulboyne]

Yomiuri: Bribing foreign officials tarnishes national image

It is unforgivable for companies to simply accept the notion that providing kickbacks in developing countries is just another "business practice." The first arrest in a bribery case in connection with Japan's official development assistance projects should be a strong signal to Japanese companies to change their way of looking at things. Pacific Consultants International's accounting irregularities relating to Japanese projects to dispose of chemical weapons abandoned by the Imperial Japanese Army in China during World War II are now developing into an alleged violation of the Unfair Competition Prevention Law that prohibits bribing foreign government employees. According to investigations by the Tokyo District Public Prosecutors Office, a former president of PCI and others are suspected of handing over 90 million yen in 2003 and 2006, at the request of the head of the office in charge of a construction project to build an east-to-west trunk road in Ho Chi Minh City in Vietnam. This was the second arrest linked to bribery of foreign government officials after the Fukuoka Local Public Prosecutors Office filed a summary indictment last year against two former executives of electrical and engineering company Kyudenko Co.'s local subsidiary in the Philippines who had provided sets of golf clubs to two high-ranking officials at the Philippines National Bureau of Investigation. Japan is Vietnam's largest donor country, providing about 100 billion yen in ODA last fiscal year.

Tokyo-based PCI was previously found to have accounting irregularities of about 140 million yen that stemmed from padding expense claims for ODA projects in 16 countries, including Vietnam and Costa Rica, submitted to the Japan International Cooperation Agency. In Costa Rica, it was learned that PCI bribed influential local people. Monday's arrest may illuminate only some of the bribes paid by PCI in developing countries. We hope prosecutors will uncover the full scope of what PCI has done in winning bids. In 1998, member countries of the Organization for Economic Cooperation and Development, including Japan, as well as some nonmember countries concluded a convention to prevent the bribing of government officials. Along with that, Japan prepared the necessary domestic legislation by revising the Unfair Competition Prevention Law. In spite of that, bribery is rarely detected because it is difficult to gather the necessary information as well as to get cooperation from the foreign countries involved.

In 2002, Mitsui & Co., a major trading company, was suspected of bribing a high-ranking Mongolian government official by providing 1.3 million yen in cash in connection with an ODA project in that nation. At the time, prosecutors considered filing charges against the trading company under the Unfair Competition Prevention Law, but in the end decided not to proceed with the case. In contrast, bribery charges have been laid in about 100 cases in the United States since the OECD convention was enacted. Japan's accomplishments in this area have been outshone by a considerable degree, so much so that the OECD repeatedly recommended improvements were needed. It has also sought to have Japan take a more active approach to filing charges. It is almost impossible to eradicate corporate misconduct when government officials solicit bribes as in the PCI case, unless the recipient of the bribe is strictly punished in their own country. Meanwhile, companies should be aware that complying with such demands will lead the international community to lose trust in Japan. The government now is going to focus on ODA projects in Africa. To make good use of ODA as a valuable diplomatic tool, disciplined corporate behavior and strict oversight by the Foreign Ministry are indispensable.

[Mulboyne]

Yomiuri: Slush funds used to win Thai project

A former Nishimatsu Construction Co. executive who was arrested on suspicion of embezzling some of the firm's slush funds said more than 400 million yen from the slush funds was used to win a construction contract in Thailand, sources said. The second-tier general contractor is suspected to have used the money to improve its performance on its overseas projects. Nishimatsu Construction illegally brought about 100 million yen to Japan from a total of 1 billion yen in slush funds amassed through the firm's Southeast Asian projects, sources said. Nishimatsu was one of the country's first general contractors to take part in overseas projects. Kazuhiko Takahara, a former vice manager of the company's overseas business department, became involved in projects in Asian nations after he was transferred to the company's overseas department from its U.S. office in 1990s, sources close to the company said...Before he was arrested, Takahara told the special investigation squad of the prosecutors office he had used more than 400 million yen to win the contract for a flood prevention tunnel construction project in fiscal 2003. The project was commissioned by the Bangkok Metropolitan Administration (BMA) in Thailand..."It's taken for granted [in Thailand] that bribes are used. We had local companies offer bribes. That's why we formed a joint venture with local companies," a former Nishimatsu executive said. Meanwhile, BMA investigated the bribery and concluded that no illegal activities had taken place. Nishimatsu Construction general affairs department officials also claimed that no illegal activities had taken place...more...

[Mulboyne]

This case appeared earlier in this thread. Seems that one of the Bridgestone guys will be doing some jail time:

[url=http://www.marketwatch.com/news/story/Japanese-Executive-Pleads-Guilty-Sentenced/story.aspx?guid={B041A1B3-0234-4651-BE21-991895C78830}]MarketWatch: Japanese Executive Pleads Guilty, Sentenced to Two Years in Jail for Participating in Conspiracies to Rig Bids and Bribe Foreign Officials to Purchase Marine Hose and Related Products[/url]

A Tokyo executive of a rubber products manufacturing company pleaded guilty and was sentenced to serve two years in jail and to pay an $80,000 criminal fine for participating in two conspiracies to rig bids and bribe foreign government officials affecting the sale of marine hose and other industrial rubber products manufactured by the company and sold throughout the world, the Department of Justice announced today. Misao Hioki, the former general manager of his company's International Engineered Products (IEP) Department, pleaded guilty today to charges contained in a two-count felony charge that was filed on Dec. 8, 2008, in U.S. District Court in Houston. Hioki was charged for his role in a conspiracy to rig bids, fix prices and allocate market shares of marine hose in the United States and elsewhere and also for his role in a conspiracy to violate the Foreign Corrupt Practices Act (FCPA) by making corrupt payments to government officials in Latin America and elsewhere to obtain and retain business. Hioki is the ninth individual to plead guilty in the marine hose bid-rigging investigation. He is the first individual to plead guilty in the FCPA conspiracy. Hioki agreed to cooperate fully in the Department's ongoing antitrust and FCPA investigations[url=http://www.marketwatch.com/news/story/Japanese-Executive-Pleads-Guilty-Sentenced/story.aspx?guid={B041A1B3-0234-4651-BE21-991895C78830}]...more..[/url]

[Mulboyne]

The Nishimatsu Thai bribery case above has been getting even bigger, involving slush funds meant for politicians in Japan. It seems former company president Mikio Kunisawa has now been arrested. The Yomiuri gave a background to the charges against him a few days ago:

Nishimatsu chief 'behind scheme'

The president of Nishimatsu Construction Co. was responsible for a scheme that provided shady funds to ruling and opposition politicians through two political organizations headed by former company executives, according to sources close to the company. Several senior officials of the Minato Ward, Tokyo-based second-tier general contractor reportedly have told the special investigation squad of the Tokyo District Public Prosecutors Office that President Mikio Kunisawa, 70, instructed his subordinates to consider setting up a political organization, according to the sources. The company in effect covered membership fees for joining the two political organizations, the sources said. This might have violated the Political Funds Control Law, as the law prohibits corporate donations made to groups other than political parties. The two political organizations, Shin Seiji Mondai Kenkyu-kai and Mirai Sangyo Kenkyu-kai, were established in 1995 and 1999, respectively.

According to the sources, bribery involving collusive relationships between politicians and construction firms came to the fore in 1993-94, making it difficult to make corporate donations. Kunisawa, who was executive managing director in charge of accounting and general affairs at Nishimatsu Construction at that time, allegedly told his subordinates to consider setting up a political organization. Among the subordinates was Takashi Utsunomiya, one of four people arrested Wednesday on suspicion of smuggling 70 million yen into Japan from abroad in violation of the Foreign Exchange and Foreign Trade Law. Utsunomiya, 67, is a former president of Shoei Real Estate, a subsidiary of Nishimatsu Construction. Utsunomiya, who reported directly to Kunisawa at that time, took a leading role in developing the scheme, the sources said. He consulted Kunisawa and negotiated with the former executive who later headed the first political organization, as well as listing senior officials as members of the political organization and making them pay "membership fees" to the group, the sources said. The company reimbursed the "members" for the payment by paying them an additional bonus.

In 1995, Shin Seiji Mondai Kenkyu-kai donated 11 million yen to politicians. The following year, this figure jumped to 66 million yen, which "posed a risk of the organization drawing attention," according to a senior official. To disperse the donations, the company set up the second political organization, which was headed by another former executive, the sources said. The two groups were dissolved in 2006. A total of 478 million yen was spent on donations to lawmakers and tickets for fund-raising parties under the names of the groups. This amount includes 14 million yen in donations made from 2004 to 2006 to the fund management organization of Democratic Party of Japan leader Ichiro Ozawa, and 3 million yen to that of former Prime Minister Yoshiro Mori. Utsunomiya served as the head of the corporate development department at Nishimatsu Construction for eight years from 1993 and was regarded as a close Kunisawa aide. Kunisawa was promoted from executive managing director to vice president in 1999 and to president in 2003. Nishimatsu Construction and Kunisawa did not respond to inquiries from The Yomiuri Shimbun on Thursday.

[Mulboyne]