Asia Times: Gangsters still rake in profits from stockholders' meetings



	July 07, 1999	atimes.com

Japan

Gangsters still rake in profits from stockholders' meetings
By Edwin Karmiol

TOKYO - Corporate executives normally do not relishstockholders' meetings, but in Japan the annual events held inthe middle of the year by publicly held companies are particularlydreaded. That's because that is the time of the year when these companiesbecome subject to threats of blackmail and intimidation from theJapanese underworld.

Corporate extortionists called sokaiya demand large amountsof money in exchange for not throwing the meetings - usually heldin late June - into total chaos. The situation has become so unbearable that two years ago, a lawwas finally passed that allows courts to mete a maximum sentenceof three years in prison or a fine of three million yen ($25,000) on sokaiya who are caught red-handed.

But observers say corporations are still forking over millions ofyen to extortionists who have intimate knowledge of internalmanagement problems, irregular operations or scandals involvingtop company executives.

Indeed, just a few days after announcing that the number of firmswho gave money to sokaiya dropped 44 percent last year from 1997figures, police last week were admitting that there were companieshanding over sums ranging from less than 1 million yen ($8,350) to1 billion yen ($8.3 million). This is despite the concerted efforts of some 2,227 companiesnationwide to hold their meetings simultaneously on June 29, tominimize the disruptive attendance of sokaiya members.

According to authorities, most of the companies that succumbed tosokaiya pressure again felt they had to give in to the gangsters'demands to ensure short, trouble-free shareholders' meetings andin recognition of their ''long associations'' with sokaiya groups. Such ''associations'' go back some two decades. In truth, it wasonly recently that leading corporations and banks begandismantling special departments that handled the payrolls ofhundreds of sokaiya members who were supposed to ensure thatstockholders' meetings were held ''in an orderly manner."

Depending on the circumstances, the sokaiya may either helpwind up meetings faster by shouting down any objections or keepthe sessions going on and on by criticizing management'sperformance or revealing unsavory information.

The business of corporate racketeering was thoroughly entrenched by the time of the ''bubble economy'' of the 1970s. Sokaiya collected ''contributions'' fromfirms in exchange for not making trouble during stockholders'meetings. They bought stocks,not only to legitimize their presence during themeetings, but also to simplify their access to corporateinformation.

Some of the more enterprising sokaiya set up economic researchbureaus that became proficient in gathering classified data abouttargeted companies, including secret scandals concerning top-rankingofficials. These substantial bits of information would sometimesbe sold to the competitors of the companies at premium prices. Sokaiya also published trade and financial newsletters thatserved as a facade for their illegal activities as well as yetanother source of income. Although poorly written and edited,these publications were bought by corporations, whichalso bought ad space in them.

It has been revealed that even Japan's mostrespected companies had been dealing with the sokaiya, among themMitsubishi Motors, Toshiba, Toyota and the venerable NomuraSecurities. Several of these corporations, however, announcedthat they were severing ties with sokaiya groups.

Last year, much was also made of the arrest of two allegedsokaiya members who were said to have received 22.8 million yen($155,000) from Japan Airlines. But observers note that during the latest stockholders' meetingof Japan Airlines, plainclothes police officers were in attendanceas were a dozen suspected sokaiya members. Although no seriousobjections were raised during the event, it still lasted amarathon three hours and 25 minutes.

Japanese companies consider it humiliating to have stockholders'meetings drag on for more than 30 minutes. And if there are anyquestions entertained at all from stockholders, these are attendedto only after employees, corporate customers and sometimesgovernment representatives have had the floor.

Some observers blame the penchant of Japanese executives for keepingcorporate information as inaccessible as possible as one factorcontributing to the rise of the sokaiya. They reason that if only corporate Japan were willing to betransparent and stuck to operations that are above board,there would be not much opportunity for the sokaiya to dobusiness.

At the same time, many say the sokaiya are bound to be aroundfor quite a while yet. Even though a number of company officialscharged with involvement with the sokaiya have already been finedand imprisoned, observers point out that sokaiya membersthemselves have been getting off relatively lightly. For instance, in April a court found alleged sokaiya RyuichiKoike guilty of having received a total of $104 million inillegal loans and payoffs from four securities houses. Hissentence, however, was just nine months in jail.(Inter Press Service)

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