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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

TROUBLE MAY BE IN STORE

A retail giant falls foul of its underworld connections

By Susan Berfield and Murakami Mutsuko in Tokyo


THE NAMES ON A party guest list can reveal all sorts of secrets - especially if the host is a suspected underworld boss. Nishiura Isao, believed to be head of the Osaka-based Gokuraku-kai crime syndicate, celebrated his son's wedding last December with a lavish banquet at the five-star Royal Hotel. Among those toasting the couple's happiness were the president of Japan's premier department store, Takashimaya, and five of his senior executives.

Six months later the links between guests and host have been exposed. Three senior executives of Takashimaya were arrested June 8 on charges of paying $734,000, and possibly much more, to Nishiura in May last year. In return, the Gokuraku-kai made sure the company's annual general meetings were not disrupted from the floor. Nishiura was arrested that same day. Hidaka Hiroshi, Takashi-maya's 72-year-old president, resigned June 12 to take responsibility for the activities of his staff.

The company, founded in 1831 as an exclusive kimono boutique in the imperial capital of Kyoto, has a prestigious brand name to protect. But the resignation of Hidaka, who claimed that the payment to Nishiura was a single incident of bad judgment by otherwise honorable executives, may not shield Takashimaya. Police believe the department store has had Nishiura on its books for at least a decade, and perhaps twice that.

Nor is Takashimaya the only business, or even the only department store, to have been recently, and publicly, embarrassed by its links to the mob. Isetan, Sogo, Parco and Ito Yokado have all been accused of paying off yakuza racketeers. Daimaru executives have admitted to using Nishiura for construction jobs during the past decade, and to giving his son's company a questionable loan. Together, these cases raise troublesome questions about Japan Inc.'s notions of corporate conduct. "Japanese business leaders still have a long way to go to upgrade their management standards to internationally acceptable levels," says Suzuki Tsuneo, a professor of commerce at Hakuo Univer-sity, north of Tokyo.

Nishiura and his followers are accused of being sokaiya (sokai means a stockholders' meeting). They practice a traditional - and enduring - art. Sokaiya were originally hired by companies in the postwar era to ensure that annual general meetings took place without much ado. This was designed to quell any shareholder opposition to the companies' strategy of keeping net profits and dividends low in order to finance expansion.

By the early 1980s, companies eager to present a clean face to foreign shareholders had begun to spurn the sokaiya. In 1982, they were made illegal. But that has failed to stop them. Today they buy a small amount of stock in a corporation, often through a shelf company, to gain access to its meetings. Then they threaten to disrupt proceedings with accusations of impropriety among executives, or to prolong matters with trivial questions. Osaka police say Nishiura's son purchased 10,000 shares in Takashiyama in 1994.

Hidaka claims to know Nishi-ura only as a prominent real-estate developer. But the sheer size of the payments - the largest yet discovered - lead many to suspect otherwise. And one of the executives in detention reportedly told police that the management had "thorough confidence" in Nishiura's abilities to control the stockholders' meetings.

The arrests and Hikada's resignation come at particularly bad time for Takashimaya. Under the leadership of the energetic president - the first from outside the founding family - the department store had drawn up aggressive expansion plans. Now, though, some corporate clients have canceled their bulk purchasing contracts with the store.

"The Takashimaya scandal should teach Japanese business leaders a lesson," says Suzuki. Maybe. Takashimaya's incoming president, Tanaka Tatsuro, pro-mised to "squeeze the pus from our system and make this an opportunity for our rebirth." But he also denied any long-term relationship between Takashi-maya and Gokuraku-kai.

Most companies realize the law is unlikely to scare off the mob. So, instead, they have drawn up a novel strategy. About 80% of the top corporations will hold their annual meetings on the same day, June 27. That is about 2,200 companies in all - twice the number of sokaiya organizations. The hope is that the gangsters will not be able to make good on their threats. The downside is that legitimate stockholders may not be able to make it to all the meetings either.


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