Ethical Boundaries: Walking the Line

By Karryn Miller

Japan struggles to draw the line between entertaining guests and bribery.

Playing golf in Japan doesn’t come cheap. With green fees starting at around 10,000 yen a person, and reaching anywhere in the region of 50,000 yen for luxury courses, it’s a sport that has long retained an image of affluence. Over the years the pastime has been used to impress many a client, and in some cases a day of play has even been a tool to sway people’s actions and opinions.

In the early 1990s, Japan’s gift-giving society blurred the lines between gift-giving and bribery through a series of cases where people in power received presents to take home, golf-related offerings to sweeten certain deals and some extravagant nights out.

In September 1997, Osaka police officer Koji Tsujihara pleaded guilty to leaking pertinent fraud investigation information to Hajime Ishikawa—a man charged of fraudulent business practices—allowing him to know when he was scheduled to be followed by the police. Why? Improving his golf swing seems to have been an important part of the mix, with the indictment stating Tsujihara received a country club membership valued at 3.9 million yen, which made up the bulk of the 4.3 million yen in cash and goods the police officer received.

Earlier that same year, another Osakanative and owner of oil company Izui Sekiyu Shokai, Junichi Izui, was accused of bribing a former president of the Kansai International Airport, Tsuneharu Hattori. He was then held on trial again for enticing a number of Liberal Democratic Party officials with bribes. The prosecution accused Izui of wining and dining Hattori on a number of occasions between 1994 and 1996 in a bid to secure special favors when it came to the airport’s selection of sanitation subcontractors. Hattori also received gifts and money from Izui. On September 1, 1998, the Tokyo District Court handed Hattori a sentence of one and a half years in prison (suspended for three years) and the former president was ordered by the court to pay 1.74 million yen in fines.

The global move to stop bribery
Cases such as those of Izui and Tsujihara preceded the global Anti-Bribery Convention, championed by the Organization for Economic Cooperation and Development (OECD) to prevent the bribing of foreign government officials. Along with 37 other countries, Japan, as a signatory, committed to taking an active stance to combat bribery— entertainment or otherwise.

Following the 1997 signing, amendments to the Unfair Competition Prevention Law were made in 1998 to allow implementation of the OECD legislation. Further alterations were also made in 2001 and 2005. The projected outcome was a business environment where: a proactive approach was taken to investigating and prosecuting bribery cases involving public officials; gifts, money, and entertainment received by those in power were more visible; and a legislative framework would be put in place with stricter penalties for those involved.

The role of entertainment is clearly defined in the OECD Anti-Bribery Convention. Article One of the convention requires that parties (countries) cover the offering, promising or giving of ‘any undue pecuniary or other advantage. “This means that all advantages, including pecuniary and non-pecuniary, qualify,” says Patrick Moulette, head of the OECD Anti-Corruption Division. “The OECD Working Group on Bribery is very clear that entertainment advantages are included in this definition.”

Since its creation, the OECD Working Group on Bribery has monitored the implementation of the Anti-Bribery Convention through a rigorous monitoring system, which is based on peer review. Moulette explains that each state party is examined in two phases. Phase I reviews the legislative and institutional framework in place for implementing the convention and Phase II reviews enforcement of the convention.

Japan falls short on corruption
"Japan was referred to as “the coalition of the unwilling” in the war against corruption"After Japan’s two reviews, in 2005 and 2006, the OECD Working Group felt that Japan fell short of expectations, and pressure grew to meet global bribery standards. In late 2007, at a Transparency International Conference—a global civil society organization working against corruption—Japan, along with Britain and Canada, were referred to as “the coalition of the unwilling,” in the war against corruption.

Ernst & Young’s “Corruption or Compliance— Weighing the Costs: 10th Global Fraud Survey,” released in 2008, mirrored Transparency International’s concerns. Across the world 1,200 executives took part in the survey. Japan stood out from the crowd with 72 percent of Japanese respondents saying that their company has experienced an incident/incidences of bribery in the last two years. Yet surprisingly, only 2 percent of respondents felt that corruption was prevalent within their industry. In another twist, Japanese companies were ranked at the top when it came to how strongly they felt that laws and regulations concerning bribery and corruption are enforced.

But are all the penalties harsh enough? A case in 2000 involved officials from the Ministry of Agriculture, Forestry, and Fisheries being reprimanded due to being entertained by a Kagawa prefecture co-operative in a bid to secure subsidies. At the time, Kozo Sakaue, assistant division head at the Agricultural Production Bureau, received a 10 percent salary cut for just one month because of a trip to Shanghai with officials of the Kagawa association in May 1997. Tsuguo Joko, an assistant division head at the Agricultural Structure Improvement Bureau, was penalized with a two-month suspension for accepting three trips to South Korea, and a number of rounds of golf without disclosing it to the ministry. Joko tendered his resignation in January 2000.

Kinya Mizokami, then a farm ministry official, was also involved with receiving entertainment bribes to secure farm subsidies and was indicted in April 2000. It was alleged that the co-op had paid 1.9 million yen in entertainment bills to cover the former elite ministry official’s numerous visits to expensive bars in Tokyo and Sapporo between July 1997 and October 1999. Mizokami was suspended from work at the time and, according to The Japan Times, “he did not view the payments as bribes but as personal favors by officials from the cooperative because he was not in a position to grant subsidies for the two projects the cooperative was involved in.”

An unclear line between entertainment and bribery
The Phase II OECD report on Japan addressed the blurring of the line between favor and bribe. “In Japan, I believe the relationship between business entertaining and bribery is not very clear-cut. On many occasions bribery is offered to foreign public officials through business entertaining such as golf, and it is necessary to clarify the concept of bribes,” stated one of the experts who contributed to the report. They added, “While I assume that the third party type of entertainment is included in the offense of bribing a foreign public official, I believe that this is not clear for the public.”

Some measures have been put into place to hold those involved accountable for “entertainment favors.” The 2006 country study report by Transparency International explained that in response to huge entertainment spends for central government officials in order to gain subsidies in the 1990s, the Ethics Act was approved in 1999, and the Ethics Code and Ethics Board were subsequently created. Within the code, restrictions were placed on: “gifts or rental use of facilities exceeding 5,000 yen for assistant directors and above at headquarters, which must be reported quarterly to the head of each ministry and agency. Gifts and entertainment exceeding 20,000 yen in value are subject to public disclosure, and copies of the reports submitted by employees at the designated rank and above must be sent to the Ethics Board.” The report goes on to add, “In practice, however, these rules and regulations seem to be seldom observed.”

Japan still has a way to go in distinguishing what is harmless entertainment and what is a criminal act of bribery. But it seems that it has an even longer way to go in enforcing ethical standards in business entertaining. JI

Japan Defense Ministry Bribery Scandal

Former vice defense minister, Takemasa Moriya, and Motonobu Miyazaki, former executive of defense equipment trading firm Yamada Yoko, came under heat earlier this year—for the third time—over more allegations concerning the one-day golf outings Moriya received from Miyazaki.

Over Moriya’s four-year term, which came to an end in August 2007, the former vice defense minister is alleged to have attended numerous golf outings with Miyazaki during the executive’s time at the company; often Moriya’s wife was also in attendance. The bribes received, mainly in the form of golf outings, are said to have been worth 3.9 million yen.

In January 2008, Kyodo News reported that, “In his sworn testimony in October (2007) before the House of Representatives special committee on anti-terrorism and Iraq reconstruction affairs, Moriya said he had paid 10,000 yen for playing fees each time he played golf with Miyazaki. But Moriya has told prosecutors that he had not paid the fees for several years, the sources said.”

The Guardian newspaper reported that the entertainment Moriya received from Miyazaki influenced the ministry’s decision to buy five aircraft engines from General Electric in 2005—a deal which Yamada Yoko brokered. General Electric issued a statement saying it had found no evidence of wrongdoing by its employees, according to the article.

Moriya faced perjury charges and was arrested in November 2007. In January 2008 he was freed on a 15-million-yen bail and dropped out of the public spotlight until April 2008. At his first session at the Tokyo District Court, he pleaded guilty to charges of bribery and perjury and to taking part in bribes in exchange for contracts schemes with defense equipment traders.

According to their statements, Moriya and his wife were regularly wined and dined by the traders, including more than 100 paid rounds of golf, trips to Hokkaido and Fukuoka, and cash payments. The Japan Times reported that “in return, Moriya gave special favors to Miyazaki’s firms, first Yamada and later Nihon Mirise, on eight occasions.”

The bribery scandal is still under investigation and as the case further unfolds, a number of foreign firms associated with Yamada have also come under scrutiny.

ILLUSTRATION: Phillip Couzens