lapses

Another Scandal Unsettles Corporate Japan

TOKYO — It is the second wild boardroom drama to shake up corporate Japan in days: the country’s leading tissue maker, Daio Paper, said on Friday that it would file a criminal complaint against its former chairman, accusing him of illicitly borrowing $140 million in company funds and channeling some of that money to a Las Vegas casino company.

The controversy provides yet another lens into the seemingly free-wheeling behavior — and disregard for corporate governance — still seen among top management at some of Japan’s leading companies.

Olympus, the medical imaging and digital camera maker, has lost half its stock market value this month since its ousted chief executive released internal documents that he said showed the company made over $1 billion in improper payments over a series of acquisitions.

But the scandal at Daio Paper, which makes the best-selling Elleair brand of tissues in Japan and other paper products, is unique because the company has made public the ex-chairman’s alleged shenanigans. In a report filed with the Tokyo Stock Exchange on Friday, the company also acknowledged gross lapses in its corporate governance.

According to the report, the former chairman, Mototaka Ikawa, routinely ordered subsidiaries to deposit money into his personal bank account and to an account held by a Japanese subsidiary of the casino operator Las Vegas Sands. Mr. Ikawa has since repaid almost half of the money, the report said, but has claimed he used the rest on currency trading and dealing on the stock market.

Mr. Ikawa has denounced the report, calling it biased, but has not responded publicly to specific charges, according to the public broadcaster NHK. The report says that Mr. Ikawa has admitted to borrowing some of the money, but has suggested he intended to return it. But he failed to turn up at most of the meetings requested by the authors of the report, it said.

Daio Paper’s share price has dropped about 15 percent since reports about the loans started surfacing in the local media. Mr. Ikawa stepped down on Sept. 16.

“I apologize from the bottom of my heart for the discovery of 10.7 billion yen in loans to our former chairman, which has brought great inconvenience to our shareholders,” the president of Daio Paper, Masayoshi Sako, told a packed news conference.

Mr. Sato said the company had also fired Mr. Ikawa’s brother, a board member, Takahiro Ikawa, and their father, Takao Ikawa, who is an adviser to Daio Paper and a former chairman. His father, Isekichi Ikawa, founded the company in 1943.

The dominance still wielded by the founding family was excessive, Mr. Sato said, though he added that the company would still ask Takao Ikawa for advice from time to time. The Ikawa family is a major shareholder in the company.

According to the report filed with the stock exchange, which the company said was prepared by an outside panel of legal experts, Mr. Ikawa ordered seven subsidiaries to lend him a total of 10.68 billion yen between May 2010 and September 2011. He has since repaid 4.75 billion yen.

“In many cases, the former chairman would unilaterally demand: ‘You must deposit X million yen into my account by tomorrow,’ ” the report said. Executives at the subsidiaries knew Mr. Ikawa wanted the funds for personal use but did not question him, and the loans were made without collateral, it said.

Some of the subsidiaries were forced to take on more debt to cover for the loans to Mr. Ikawa, the report said. In the year to March, the company booked a net loss of 8 billion yen on sales of about 410 billion yen.

According to the report, Mr. Ikawa demanded that the money be paid into a personal account held under his name or to the casino company, sometimes through another Daio Paper subsidiary. Daio Paper has no business dealings with Las Vegas Sands, the report said.

In a harsh self-criticism, the report said that company executives, board members and even its auditors turned a blind eye to the loans.

“At the Daio Paper Group, speaking out against the Ikawa family has not been condoned,” the report said. “When the former chairman asked for a transfer of funds, his wishes were obeyed without question.”

Daio Paper said that it would ask Mr. Ikawa to repay the remaining 5.93 billion yen and investigate how he used the money.

The company also announced a 50 percent pay cut for the president, Mr. Sako, and other censures for its board members, and said it would set up a special committee to study ways to bolster its corporate governance.

Article source: http://www.nytimes.com/2011/10/29/business/global/new-scandal-presses-corporate-japan.html?partner=rss&emc=rss

Japan Strains to Fix a Reactor Damaged Before Quake

The Monju prototype fast-breeder reactor — a long-troubled national project — has been in a precarious state of shutdown since a 3.3-ton device crashed into the reactor’s inner vessel, cutting off access to the plutonium and uranium fuel rods at its core.

Engineers have tried repeatedly since the accident last August to recover the device, which appears to have gotten stuck. They will make another attempt as early as next week.

But critics warn that the recovery process is fraught with dangers because the plant uses large quantities of liquid sodium, a highly flammable substance, to cool the nuclear fuel.

The Monju reactor, which forms the cornerstone of a national project by resource-poor Japan to reuse and eventually produce nuclear fuel, shows the tensions between the scale of Japan’s nuclear ambitions and the risks.

The plant, a $12 billion project, has a history of safety lapses. It was shuttered for 14 years after a devastating fire in 1995, one of Japan’s most serious nuclear accidents before this year’s crisis at the Fukushima Daiichi Nuclear Power Station. Prefecture and city officials found that the operator had tampered with video images of the fire to hide the scale of the disaster. A top manager at the plant recently committed suicide, on the day that Japan’s atomic energy agency announced that efforts to recover the device would cost almost $21.9 million. And, like several other reactors, Monju lies on an active fault.

Even if the device can be removed, restarting the reactor will be risky, given its safety record and its use of highly toxic plutonium as fuel, said Hideyuki Ban, co-director of the Citizens’ Nuclear Information Center, a watchdog group, and a member of an advisory government committee on Japan’s long-term nuclear energy policy. The plant is 60 miles from Kyoto, a city of 1.5 million people, and the fast-breeder design of the reactor makes it more prone to Chernobyl-type runaway reactions in the case of a severe accident, critics say.

“Let’s say they make this fix, which is very complicated,” Mr. Ban said. “The rest of the reactor remains highly dangerous. And an accident at Monju would have catastrophic consequences beyond what we are seeing at Fukushima.”

Japan badly needs sources of energy. By closing the loop on its nuclear fuel cycle, Japan aims to reuse, recycle and produce fresh fuel for its 54 reactors.

“Monju is a vital national asset,” said Noritomo Narita, a spokesman here in Tsuruga for the reactor’s operator, the government-backed Japan Atomic Energy Agency. “In a country so poor in resources, such as Japan, the efficient use of nuclear fuel is our national policy, and our mission.”

Critics have been fighting the project since its inception in the 1970s. “It’s Japan’s most dangerous reactor,” said Miwako Ogiso, secretary general of the Council of the People of Fukui Prefecture Against Nuclear Power. “It’s Japan’s most nonsensical reactor.”

After promises of safety upgrades, as well as lavish subsidies and public works, the government has wooed local officials into allowing a restart of the reactor. In Fukui, the government had ready allies: with 14 nuclear reactors, it is Japan’s most nuclear-friendly prefecture. (Fukushima, in second place, has 10 reactors.)

Monju was reopened in May 2010, and just three months later, the 3.3-ton fuel relay device fell into the pressure vessel when a loose clutch gave way. In the two decades since the reactor started tests in 1991, the atomic energy agency has managed to generate electricity at the reactor only for one full hour.

In Monju, Japan is pursuing a technology that most countries have long abandoned. Decades ago, a handful of countries, including the United States, started exploring similar programs. But severe technical difficulties, as well as fears about the weapons-grade plutonium that the cycle eventually produces, have led most countries to scrap their programs.

But Japan has remained staunchly committed to the Monju project. The government of Prime Minister Naoto Kan has shielded it from the deep cuts in spending that it has required of other national projects since it came to power in September 2009.

Under a government plan, Japan would use technology developed at Monju to commercialize fast-breeder reactors by 2050.

Mr. Kan has recently hinted at an overhaul of Japan’s nuclear policy, though he has not commented specifically on the fate of the Monju reactor.

Article source: http://www.nytimes.com/2011/06/18/world/asia/18japan.html?partner=rss&emc=rss

Another Scandal Unsettles Corporate Japan

Japan Strains to Fix a Reactor Damaged Before Quake

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