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Executives in Japan Nuclear Scandal Blame Dead Local Official

Aaron Clark, Stephen Stapczynski and Shiho Takezawa

(Bloomberg) -- Top Japanese utility executives who admitted to taking illicit payments related to their nuclear business sought to deflect blame onto a deceased local official and vowed to stay in their roles, potentially deepening the nation’s latest corporate governance scandal.

Kansai Electric Power Co.’s Chairman Makoto Yagi and President Shigeki Iwane spent more than three hours Wednesday detailing in a public briefing how they and 18 other executives received nearly 320 million yen ($3 million) in cash and gifts, including suits and gold, from a former deputy mayor in the western town Takahama, which hosts the company’s biggest nuclear plant. They didn’t return the payments because the official, who died in March at the age of 90, wielded influence and intimidated employees, they said.

The Kansai Electric payments are the latest-high profile exposure of corporate malfeasance in Japan, which include the arrest last year of Nissan Motor Co.’s chairman for concealing more than $140 million in compensation and Kobe Steel Ltd.’s indictment in 2018 for falsifying quality data. It also follows the acquittal last month of executives charged with negligence related to the Fukushima meltdown, which has loomed in the background of the nation’s worst nuclear scandal since the 2011 disaster.

“It’s a little surprising that the chairman and president are continuing to stay on given the focus on corporate responsibility in Japan lately,” said Tom O’Sullivan, founder of Tokyo-based energy consultant Mathyos. Combined with the Fukushima ruling, “the Japanese public could not be blamed for coming to the conclusion that there’s not accountability in the industry.”

‘Outrageous, Murky’

Both top executives, who admitted to taking the payments, said Wednesday that they’ll stay in their roles to investigate the issue and seek to restore trust in the company. They also denied that the payments influenced the company’s contracting decisions.

Yoshihide Suga, chief cabinet secretary, said Wednesday that it’s “outrageous” Kansai Electric executives accepted the gifts in a “murky” fashion. Meanwhile, a group of opposition lawmakers are seeking to question the executives and hold a parliamentary debate on the issue. Earlier this week, Economy Minister Isshu Sugawara ordered an independent investigation.

Kansai Electric has estimated that meeting post-Fukushima safety standards at the Takahama plant would require $5 billion worth of retrofits. Meanwhile, reports over the past week in Japanese media -- including Nikkei, Kyodo and Asahi -- painted a picture of a municipal official directing contracts for work on the plant to local companies he was associated with.

Nuclear Nerve

That the drama is playing out in the nuclear power industry touches a raw nerve in Japan, where the technology has been shunned since the trauma of Fukushima. Public opinion has consistently been opposed to restarting the nation’s reactor fleet, once the biggest source of atomic power in Asia, as trust in the both the industry and regulators hasn’t recovered.

In a 20-page internal report the company released Wednesday, it characterized the former official, Eiji Moriyama, as quick to anger, even getting upset if executives didn’t answer phone calls on the weekend. He would sometimes intimidate employees, saying that he could make it difficult for the utility to operate the Takahama plant if he didn’t get what he wanted, according to the report. The report also highlighted his help in the 1970s and 80s, when he was deputy mayor, getting the reactors approved and built.

Gold, Suits, Cash

The company also revealed new details Wednesday of the gifts and cash Moriyama gave to executives from 2006 to 2018. Satoshi Suzuki, director of the utility’s nuclear power division, received the most at 123.7 million yen, which included 500 grams of gold and 14 suits, as well as $35,000 in U.S. currency.

Kyodo News also reported that Yoshida Kaihatsu, a local company that paid Moriyama money that was funneled to officials, won contracts worth at least 2.5 billion yen for work at Kansai’s nuclear power plant. Moriyama was also a part-time adviser for a Kansai Electric unit from 1987 through December last year.

Of immediate concern for Kansai Electric could be the slow restart of three of its idled reactors, including two at Takahama. Every month of delay for each reactor -- which are expected to start in 2020 at the earliest -- will saddle the utility with extra fuel costs of 3.6 billion yen, according to Nomura Securities Co.

Kansai shares on Thursday resumed declines after a two-day rally, dropping as much as 2.2%. The company is down almost 11% from Thursday’s close, before the payments were revealed by Kyodo News.

(Updates share price in final paragraph.)

--With assistance from Reed Stevenson and Isabel Reynolds.

To contact the reporters on this story: Aaron Clark in Tokyo at aclark27@bloomberg.net;Stephen Stapczynski in Singapore at sstapczynsk1@bloomberg.net;Shiho Takezawa in Tokyo at stakezawa2@bloomberg.net

To contact the editor responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net

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