DY: Tsutsumi's arrest marks end of an era. TFP: It's just a beginning.

Friday, March 04 2005 @ 09:46 AM JST

Contributed by: Y.Yamamoto

Tsutsumi had already apologized in 2004

Yoshiaki Tsutsumi, 70, had already stepped down in March last year as the Chairman of Seibu Railway Co., flagship entity of the Seibu empire he inherited from his father, Yasujiro Tsutsumi, to take his responsibility for a payoff scandal where he paid corporate racketeers a lot of money to silence them. But now that the Tokyo District Public Prosecutors arrested Tsutsumi for a 10-day detention period, the man who has been named the world's wealthiest billionaire six times by Forbes magazine is facing charges of violations of the Securities Exchange Law.

It doesn't really matter over what charges Tsutsumi was arrested this time because his entire career as corporate leader which started 40 years ago has not been built up in a law-abiding way. Also in 1965 he already inherited the loot from his father, another criminal who had once been the Lower House Speaker a little before the birth of the 1955 System. But just for your reference, his charges this time are 1) falsification of the Seibu's annual securities report (Japan's SEC report) for fiscal year 2003 and 2) insider trading.

More specifically Seibu has been falsifying its securities report, the practice dating back at least to 1957, by artificially understating the combined shareholding by the 10 largest stockholders to avoid disclosing it has always exceeded the ceiling set by the Tokyo Stock Exchange at 80% of the total outstanding shares. At the end of fiscal 2003, the ratio in that respect was more than 88% whereas the securities report put it at 43%. I am sure it indicates there was some other motive than just to avert the otherwise-unavoidable delisting that Tsutsumi ordered his puppets at the Investor Relations Department to underreport the ratio much more than by 8%. But for now every newspaper says delisting was the only thing that Tsutsumi wanted to avoid. Tsutsumi's trick to almost halve the stockholding ratio for the 10 largest shareholders was as simple as that he just told his people to invent 1,200 phony individual shareholders.

The second accusation against the former Seibu Chairman is the charge of insider trading. In the spring of 2003, a new online stock trading system was implemented at the TSE. Since the puppets at the IR Department thought their traditional gimmick with stock certificates wouldn't be workable anymore under the new paperless system, they asked their boss what to do. At that time Tsutsumi told them to keep using the same trick when submitting the 2003 securities report, while in the meantime hastily selling Seibu's 18 million shares worth JPY 21.6 billion, actually being held by Kokudo Corp. to 10 corporate investors. (See the note below.) Kokudo is the virtual head-office of the Seibu conglomerate with resort developers, golf courses, a hotel chain, railways, department stores and other large-scale retailers, etc. orbiting around it. Since Kokudo itself is a small, unlisted company capitalized at JPY 100 million, you can see in it the same "convoluted" shareholding structure particular to Japan.

(Note) Some other reports say Tsutsumi dumped 72 million shares at a combined JPY 65 billion to 70 corporate buyers and 2 individuals before the stock price nosedived.

As usual the local media have been trying very hard to trivialize and localize the implications of the most recent revelation as if they weren't only the tip of the iceberg. They are trying to insinuate that the six-time world's richest man should be solely held responsible for everything, including the deaths of Terumasa Koyanagi, former-President of Seibu and another senior manager at Kokudo Corp. Koyanagi had landed the Seibu presidency in one of those amakudari, descents from heaven, from the Ministry of Land, Infrastructure and Transport, which is one of the ministries with the most pivotal role under the 1955 System. And on the part of the railway company, a corporate reform committee was hastily formed by "independent outsiders." Every newspaper as well as TV station reports that the head of the committee commented they will succeed in transforming Seibu into a company that deserves to regain people's trust "despite" the arrest of the former chairman "because (their) reform plans had been approved by Mr. Tsutsumi before he was arrested." Despite this unrepentant statement by the "independent outsider," the media insist that the worst is over and that the Seibu group is now on the right track to reform itself. That's why the March 4 issue of the Daily Yomiuri gave a subhead to one of its Tsutsumi stories: "Tsutsumi's arrest marks end of an era." Another one of those equally unrepentant dailies, the Sankei Shimbun totally neglects the fact that there's pretty much in common between the Fuji-Sankei Media Group's way of defending itself from a reform-minded outsider at the expense of general shareholders and the Tsutsumi family's modus operandi to achieve the same goal.

In March 1966, soon after Tsutsumi's rise to power, he got married. About 1,500 guests attended the extravagant wedding reception held at Tokyo Prince Hotel. According to today's Sankei Shimbun, the party was attended by 1,500 celebs from the Imperial family and the political and business circles. But I am reasonably sure the guests also included yakuza-affiliated sokai-ya, or corporate racketeers, because these professional blackmailers, as well, are an integral part of the 1955 System.

As for the politicians whose involvement in the Tsutsumi's crimes is much more than just likely, the media are tight-lipped. They just quote Prime Minister Junichiro Koizumi as saying: "I have developed a good friendship with Mr. Tsutsumi. But he has never asked me to do him a favor." Some other media reports have it that the intra-LDP faction headed by former Prime Minister Yoshiro Mori has traditionally had the closest ties with Tsutsumi and that that is why the intra-party faction, which Koizumi is also from, has its headquarters inside the Akasaka Prince Hotel.

But basically the media are using the same method as the one they used when the Chief Producer at Japan Broadcasting Corporation (NHK) whistleblew against NHK and some LDP politicians. (January 19 TFP story "Chief Producer at NHK whistleblows in Japanese way".) Sankei Shimbun and other media organizations except the Asahi Shimbun kept saying what were at issue there boiled down to the following two questions: 1) whether or not these LDP politicians gave explicit pressures on NHK not to air the controversial TV program dealing with the Emperor's responsibility for the wartime sex slavery and 2) whether or not they met in person with the NHK executives before the program went on air. Of course these media people do know 1) very few Japanese pork-barrel operators are careless enough to be explicit about their demands to their industrial constituencies and their compliance with the demands by the other side, and 2) like all of us, these people in collusive ties with each other can avail themselves of telephone or e-mail on top of face-to-face talks when discussing their reciprocal deals. Even a thief with an average IQ knows he had better wipe out all the fingerprints before leaving the scene of the crime.

No matter how long the fallen billionaire is going to stay behind bars, this can never be the end of an era. This is just the beginning of a long and potentially reversible process toward the collapse of the System called the post-WWII Japan. And perhaps the key to successfully finding a viable alternative to the rotten system is to overhaul the entire media which have always turned a blind eye to these crimes in the last half-century.

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