Nuclear Mafia Exposed in Kansai Electric Power Co. (Kanden) Scandal ~ METI pleads ignorance of bribes and kickbacks driving the nuclear industry
by Ban Hideyuki, CNIC Co-Director
Kansai Electric Power Co. (Kanden) has disclosed that 20 officials, mainly in its nuclear power division, received money and gifts worth more than 300 million yen from Moriyama Eiji, the late former deputy mayor of Takahama Town, Fukui Prefecture, which hosts KEPCO’s Takahama nuclear power plant. Those who received the gifts include the utility company’s Chairman Yagi Makoto, former director of its nuclear power division Toyomatsu Hidemi, and the division’s deputy director Suzuki Satoshi. The gifts were given in various forms, such as Japanese yen, U.S. dollars, gold coins, and vouchers for tailored suits. Kanden announced this at a news conference on September 27, 2019.
The money originated from Yoshida Kaihatsu, a construction company based in Takahama that had received contracts from Kanden. This company paid the amounts to Moriyama as rewards, and he donated the money to the Kanden officials later. These payments were made behind the scenes, which means that the money was off-the-book, under-the-table cash.
Moreover, additionally collected data have revealed that Yoshida Kaihatsu and Yanagida Sangyo, a maintenance service company based in Takasago, Hyogo Prefecture, for which Moriyama served as advisor, as well as several security companies he set up jointly with Kanden, received large numbers of contracts, totaling more than twenty billion yen, from the utility during the past five years. It was also disclosed that these security companies including Oing and Ivics and the other joint ventures handed cash and gifts directly to the Kanden officials without any involvement by Moriyama. As a result, the combined amount of such questionable cash and gifts far exceeded the 300 million yen mentioned above.
Kanden’s top officials were forced to disclose this scandal in a press conference because the Tax Agency’s Kanazawa office conducted an investigation into Yoshida Kaihatsu in January 2018. This investigation revealed that the construction company paid large amounts of money to Moriyama, which prompted the Tax Agency to conduct investigations into both Moriyama and Kanden. In an attempt to justify their position, the utility’s executives explained to the tax investigators that they kept the money only temporarily, and returned part of the funds to Moriyama. As for the remaining funds, which were determined by the tax investigators to be income, the utility officials filed the final tax returns and paid the imposed tax. Kanden then set up an in-house compliance committee, which conducted a fact-finding investigation into the irregularities and punished its chairman and other officials by cutting their salaries or by imposing other forms of punishment. On September 11, 2018, the committee compiled its investigation report, but the utility did not disclose the report to the public. However, there was a surprising development later when a whistleblower, who called himself a member of a group for improving the Kanden organization, leaked information about the scandal to the Kanden president, the Tax Agency, mass media, citizens’ groups opposing nuclear power generation, and others. Confronted with this situation, the utility executives had no choice but to abandon their policy to conceal the scandal and were forced to disclose the details in the news conference.
Moriyama was one of those who aggressively promoted construction of Unit 3 and Unit 4 of the Takahama nuclear plant. He served as deputy mayor of Takahama Town for about ten years until 1987, when he retired and became an adviser to Power Plant Services, a fully-owned subsidiary of Kanden. He also served as counselor for Yoshida Kaihatsu at the same time. This means that he exerted great influence on both the contractees and the contractor. Although the utility asserts that its order-issuing process was appropriate and fair, the fact that Moriyama represented both sides constituted a conflict of interest and gives rise to suspicion about fairness. Kanden, on the other hand, seems to have actively taken advantage of Moriyama to win consent from local anti-nuclear residents.
The Tax Agency’s investigation does not cover periods that go back more than seven years. Meanwhile, the period when Moriyama served as an advisor for a subsidiary of Kanden was much longer, around 30 years. Indications are that the cozy relations between Kanden and Moriyama might have continued for a long time, along with the flow of off-the-book funds from the deputy mayor to the utility.
The Ministry of Economy, Trade and Industry (METI) claims that they had no knowledge of the 2018 report on Kanden’s in-house investigation concerning the flow of gifts and cash from Moriyama to its executives until Kanden held the press conference in September 2019.
Despite this comment, it has recently been disclosed that METI has been seconding its officials to the Takahama Town office regularly since 2008. At present, the fourth official is on loan to the town office. Former METI Minister Sugawara Kazuhide admitted this in the lower house’s Budget Committee questioning session on October 11, 2019. He resigned from the post later, on October 25.
The year 2008 was when the plan to introduce MOX (mixed plutonium and uranium oxide) fuel to the Takahama nuclear plant first surfaced. In September 1999, local residents discovered the falsification of safety data on the MOX fuel manufactured by Britain’s BNFL for use in Takahama Unit 3, and waged a strong protest against the project. Confronted with this situation, METI transferred an official to the Takahama Town office to strengthen ties with former Takahama Town deputy mayor Moriyama and Kanden in an attempt to promote the MOX operation as a national project. In 2010, two years after METI had begun transferring officials to Takahama, the ministry’s efforts produced favorable results and Takahama NPP began to use MOX fuel.
Considering such close relations between METI, Moriyama and Kanden, we can hardly believe that the ministry remained ignorant of the Tax Agency’s investigations into Yoshida Kaihatsu in January 2018, or the ensuing searches of both Moriyama’s house and Kanden premises.
Some Diet members have repeatedly demanded that Kanden participate in parliamentary deliberations and joint hearings by the ruling and opposition parties on this scandal, but the utility flatly refuses to comply with their demand. This should be handled by METI, because it is within the ministry’s jurisdiction. But the only thing the ministry did was to say that they would convey the lawmakers’ demand to Kanden. METI does not show any signs of forcing the utility to meet this demand, apparently because they want to defend Kanden. The ministry insists that it has ordered Kanden to conduct hearings of its officials concerned in the scandal before compiling its investigation report, and that they are waiting for the arrival of the report. Meanwhile, Kanden says it will set up a third-party committee chaired by Former Attorney General Tadagi Keiichi that will conduct investigations into the scandal and compile the investigation report. The committee is scheduled to complete the report in December, but it is predicted that the report will be come out in the new year since the scope of the committee’s investigation will cover a large number of people. METI says it wants to wait until the report is completed before taking any action.
Amid this situation, a preparatory meeting for the projected “energy research committee” was held in the Diet on October 31 and economist Kaneko Masaru and former METI official Koga Shigeaki were invited. This meeting was organized by a group of ruling and opposition party members demanding establishment of a formal parliamentary committee that will deliberate on such matters as Japan’s Basic Energy Plan. Professor Kaneko maintained that the third-party committee organized by Kanden itself cannot be considered genuinely “third party,” and that the third-party committee should be set up by METI. This demand was also voiced by a participant in the joint hearing on the scandal organized by the opposition parties. METI, however, is obstinately ignoring this demand. Professor Kaneko also pointed out that during the 2012-2015 period former trade minister Seko Hiroshige received political donations totaling six million yen from Yanagida Sangyo, the maintenance service company for which Moriyama served as an advisor. This means that the off-the-book money was funneled back not only to Kanden but also to METI. Additionally, Koga hinted at the possibility that some Diet members might have received questionable gifts and money from companies linked to Moriyama.
Kanden’s stance in the September 11 report was to strongly emphasize Moriyama’s hair-trigger temper and claim that it was impossible for the utility executives to return the gifts and money to him. This excuse makes it sound as though Moriyama was to blame and not the Kanden executives.
In any case, there is no reference to why and how the compliance committee was set up for the in-house investigation. Since the chairman and the top officials of Kanden’s nuclear power division had received the gifts and money, it is difficult to imagine that they organized the committee and compiled the report for the sake of the company employees. Although METI categorically denies the view that the committee was established for the purpose of submitting its report to the ministry, it would be natural to presume that that was what was happening. It is quite certain that as soon as they learned that the agency had launched the tax investigation, METI pressed Kanden to deal with the Tax Agency’s investigation and to work out measures to prevent recurrences.
On October 24, a citizens’ group was launched to demand that KEPCO be charged for its illicit money transactions and the group is currently trying to recruit as many as 1000 people who wish to participate in a class action lawsuit against the utility. They plan to file a lawsuit against Kanden with the Osaka District Court in December. This is a new move, emerging from the citizens’ side, aimed at demanding a thorough investigation of the Kanden scandal, and it may give momentum to the moves already organized.
The basic reason why this cozy relationship emerged between the electric power company and the local town official was that the nuclear power plant is an unwelcome facility for local governments. In the 1970’s, no sites were available for building new nuclear power plants and the utilities had no choice but to build more nuclear reactors within the premises of their existing plants. Since local residents do not approve of the existence of the nuclear plant in their community, the utilities are being forced to take measures to alleviate the residents’ feelings of aversion. One such measure taken by the utility this time was to appoint an influential local person to the post of executive or adviser of the utility’s subsidiary, and another measure was to donate massive amounts of money to the person or to entertain him repeatedly. For these purposes, KEPCO used off-the-book funds. In 1974, the government introduced a system to allocate subsidies to local governments that allowed electric power utilities to build nuclear power plants or other types of electric power generation facilities in their community. This system was also aimed at easing local residents’ reluctance to accept such facilities. The then Minister of International Trade and Industry, Nakasone Yasuhiro explained it in this way in the Diet deliberations on the relevant bill.
The reason why Kanden was easily able to create off-the-book funds is that the utility is adopting an electricity-rate calculation system called the “overall cost method.” Under this system, the electricity rate is calculated by adding an appropriate amount of profit to the overall cost. This is the system generally used for calculating utility charges. Although electric power companies are private firms in Japan, they are allowed to monopolize the electric power supply business in each district. METI is checking their business operations, but it is impossible for the ministry to check the validity of the price in each contract. This enabled the utility to include kickback funds in their contract prices. Thus consumers are being forced to pay for illicit money, as it is passed on to their electricity rates.
A novel entitled “Tokyo Blackout” was published in 2014. The author of this novel is said to be an incumbent METI official whose penname is Wakasugi Retsu. The story describes the trick of creating off-the-book funds. According to the author, utilities place an order at a price 20% higher than the market price, and force local businesses to funnel back the profits. He pointed out that the illicit funds are distributed not only to the utility itself but also to the Federation of Electric Power Companies, local governments, Diet members, and many others. The author dubbed this system the “Electric Power Monster System.” The Kanden scandal has unveiled a part of this monster system.
Kanden’s third-party committee is scheduled to publish its report early in 2020. We would like to observe closely METI’s response to the report, Diet members’ moves, and future developments involving lawsuits against the utility. In the current circumstances, where liberalization of the electric power supply business is expanding, we would like to create popular movements to stop the illicit ‘nuclear money’ that is hampering the progress of liberalization.