News Archive : Japan Real Estate

Monday, November 14, 2005

Seibu Railway provided 400 million yen to ultranationalist through land deals

Seibu Railway provided 400 million yen to ultranationalist through land deals

Seibu Railway Co. provided 400 million yen to a former high-ranking member of an ultranationalist group in the six years to 2003 via a string of transactions involving land in Kanagawa Prefecture, sources said Saturday.

The Tokyo Regional Taxation Bureau, which probed the deals, concluded that the money was essentially a taxable "social expense" designed to curry favor with the 73-year-old ultranationalist, the sources said.

Based on the conclusion, the tax bureau, an arm of the National Tax Agency, has ordered the railway operator to pay more than 100 million yen in back taxes, they said.

The bureau also concluded that Seibu Railway used fraudulent accounting practices in dealing with the money, an action tantamount to hiding taxable income, they said.

The sources said Seibu Railway appears to have provided financial favors to the ultranationalist over the past two decades, including the 400 million yen.

Seibu Railway sold land it owned in Yokosuka and other locations in Kanagawa Prefecture via a subsidiary to real estate companies in Yokohama and other places, they said.

The real estate companies had ties with the ultranationalist through an intermediary.

The tax bureau found that some of the land was sold by Seibu Railway to the real estate firms at prices far below market value.

The bureau concluded that the railway operator conducted the deals with the aim of funneling the financial favors to the ultranationalist, the sources said.

The bureau appears to have concluded that the differences between market prices of the land and the discounted sales prices were essentially taxable "social expenses" to curry the ultranationalist's favor.

Murky ties between the ultranationalist and Seibu Railway started in the early 1980s, when the ultranationalist complained to the railway company that former Seibu Railway Chairman Yoshiaki Tsutsumi caused noise problems when he used a helicopter to visit a cemetery in Kamakura, Kanagawa Prefecture, they said.

After the complaint was conveyed to Seibu Railway, the railway company continued to provide financial favors to the ultranationalist through land deals involving plots in Kamukura, Yokosuka and other locations, they said.

Seibu Railway released a statement saying the tax bureau conducted an investigation into the land deals after it came to light in 2004 that the company paid off a "sokaiya" corporate racketeer.

Police arrested nine people, including three Seibu Railway executives, on March 1, 2004, in connection with giving benefits worth 88 million yen to racketeer Ryuga Haga.

The Seibu officials allegedly gave 88 million yen to the racketeer by selling land in 2001 at bargain prices.

The Japan Times: Nov. 13, 2005