Japan's car-makers admit paying out extortion cash

TOYOTA AND NISSAN, Japan's biggest car-makers, said yesterday that they had made payments to the same alleged corporate racketeers who were arrested on Monday on suspicion of extorting money from Japan Airlines.

Toyota, Nissan and JAL paid Taihei, a company believed to have ties with "sokaiya'' (or corporate racketeers) for the apparent rental of artificial potted plants.The case follows dozens of arrests last year of officials of Japan's largest manufacturers and financial institutions for paying off sokaiya, including Nomura Securities, Dai-Ichi Kangyo Bank, Hitachi and Mitsubishi Motors.

The pay-offs are frequently disguised as payments for goods or services, such as the rental of a seaside hut for employees.

"We had a contract with Taihei for plants. Last October we announced that we'd stop all contacts with sokaiya, and since then we've had no contact with sokaiya, including Taihei,'' said Nissan spokesman Keiichi Tsuboi

In Japan, poor disclosure and lax regulatory supervision enable companies to hide damaging information, leaving them vulnerable to sokaiya. Companies pay sokaiya to keep them quiet at shareholder meetings, or to enlist their help in silencing other troublesome shareholders.

Yesterday Tokyo Metropolitan Police arrested the president of Taihei, Mamoru Arai, 53, along with Hitoshi Ogasawara, 51, a high-ranking member of an extortion group called Morimoto Kigyo Chosakai.

They were charged with extorting 22.8m from JAL on 33 occasions between November 11 1995 and October 10 1997. They have not been charged with extorting from Nissan or Toyota.

The police are questioning several Japan Airlines' officials in connection with the payments, JAL President Isao Kaneko said yesterday. His pay will be cut by 50 percent from September to December because of the scandal.

One of JAL's directors, Kotaro Sato, resigned yesterday

Nissan, which rented plants for display in conference rooms and lobbies, said its payments to Taihei were "much less'' than JAL's. The world's third largest car-maker declined to detail the amount paid out.

Toyota also rented potted plants from Taihei. Kohei Muramatsu, a spokesman for Japan's largest car-maker, said: "We cut our ties with Taihei last spring.''

JAL had dealings with Taihei from April 1990 until March 1998, Kaneko said. Taihei was introduced to JAL by Morimoto Kigyo Chosakai

Toyota saw its shares rise 30 to 3,270 yesterday. Nissan's shares fell one yen to 469; JAL rose two yen to 350.

- Bloomberg