Defense Ministry punishes 93 MSDF members in KHI gift scam

Asahi Shimbun

2 days ago

The Defense Ministry disciplined 93 Maritime Self-Defense Force members for decades of collusion with a leading defense contractor.
Akira Saito, chief of staff of the MSDF, was among those caught in the fallout involving Kawasaki Heavy Industries Ltd.
Over a period of 40 or so years, KHI lavished the crews of submarines with gifts paid for from a slush fund based on bogus invoices to subcontractors.
Also on July 30, the ministry released its final report in a year-long special investigation into the scandal. However, it failed to uncover the full extent of the cozy ties between the MSDF and KHI.
Under the disciplinary measures that took effect on July 30, Saito faces a one-month reduction in pay for his failure to properly supervise subordinates. In addition, 73 supervisors and two commanding officers received reprimands, while 17 submarine captains received warnings.
40 YEARS OF MISCONDUCT
The final report cited fictitious transactions between KHI and its three subcontractors based on funds earmarked by the Defense Ministry for submarine maintenance and repairs.
KHI created slush funds to the tune of 1.7 billion yen ($11.4 million) through the fictitious transactions over the six years through fiscal 2023, the report said.
Kawasaki used the funds to supply goods requested by submarine crew members without going through official procurement procedures. The items included vital repair materials, refrigerators and heating appliances for submarines.
Separately, 13 crew members and supervisors were found to have received personal items unrelated to their duties. The goods included gaming consoles, golf equipment and wristwatches, totaling around 1.4 million yen. Most of them received items worth tens of thousands of yen, and one member received goods worth about 500,000 yen.
They are all being investigated for suspected breaches to the Self-Defense Forces Personnel Ethics Law, and additional disciplinary action is being considered.
The illicit gift-giving is believed to have continued for at least 40 years. The final report described it as 'a structural problem within the organization that would not be acceptable to the public.'
Of the 1.7 billion yen in slush funds, about 451 million yen was paid to subcontractors, and Kawasaki itself used part of the funds to purchase personal items and beer coupons.
While the specific uses of most of the funds could not be identified, the report confirmed that only a portion had been used to benefit MSDF personnel.
No recent evidence was obtained for entertainment such as dining hospitality, largely due to the reduced opportunity because of the COVID-19 pandemic, and the absence of receipts or objective proof.
PROCEDURAL FLAWS IN PROCUREMENT
The report pointed out that the root of the problem lay in slow and inefficient procurement procedures within the MSDF, which made it difficult to obtain key items in a timely manner.
As a result, supervisors often resorted to having Kawasaki perform work in advance and paying later, essentially on credit, creating the ideal environment for a slush fund.
To prevent a recurrence, the report proposed several reforms, such as separating the roles of order placement and acceptance inspector among supervisors, providing compliance education and improving procedures for procuring submarine equipment and personal gear.
The scandal came to light in July last year following a tax audit by the Osaka Regional Taxation Bureau. In March this year, KHI was ordered to pay around 1 billion yen in taxes for hidden income and other unreported income over a six-year period.