570 MILLION YEN BILKED OVER FIVE YEARS?

University ex-director arrested for fraud

Kyodo

Miyagi Prefectural Police on Friday arrested the former chief director of scandal-tainted Touhoku Bunka Gakuen University, who allegedly defrauded the government out of about 570 million yen in state subsidies over five years.

Shoichiro Hotta, 57, allegedly violated a law regulating state subsidies and contributions. The law stipulates a maximum penalty of five years in prison or a 1 million yen fine for violators.

Tetsunari Sato, a 49-year-old former head of the now-bankrupt university’s financial department, was also arrested on the same allegations.

It is the first time for the head of an educational corporation to be arrested in connection with a state subsidy scam.

The school is currently going through a court-mandated restructuring process. Miyagi police searched the university offices and Hotta’s house in Sendai following the arrests.

Hotta allegedly submitted window-dressed accounting records to the education ministry and defrauded the state out of the subsidies from fiscal 1999 to fiscal 2003. The ministry filed an accusation against Hotta the same day.

While Friday’s arrest concerns some 8.7 million yen that the university illegally received in December 1999 and February 2000, investigators suspect that the school obtained a total of some 560 million yen more between 2000 and 2003 and plan to file additional charges.

Prior to his arrest, Hotta admitted keeping two sets of accounting books, but maintained that he did not think too deeply about the possibility that his actions might constitute a fabrication of subsidy requests.

In February, Hotta resigned his post after his office was searched by the Sendai Regional Taxation Bureau over alleged violations of the Income Tax Law.

The search was followed by a series of scandals. About 5.4 billion yen out of 6.3 billion yen that the university said had been donated at the time of its establishment was found to be fictitious. The university also failed to pay its construction costs.

The university was also found to have taken out huge loans from nonbank moneylenders without approval from its board of directors.

Having accumulated liabilities of about 25 billion yen, the university applied to the Tokyo District Court for court protection from creditors in June under the Civil Rehabilitation Law.

In an earlier interview with Kyodo News, Hotta said the management of the university went awry after a construction firm that was to make large donations to the school went bankrupt.

Kotaro Kageyama, the current chief director of the university, told reporters Friday that Hotta’s arrest will have no impact on the school’s plan for rehabilitation and future management.