Firms pay LDP, no dividends

Twenty-five stock exchange-listed companies that were unable to pay dividends to shareholders in 2003 still managed to donate a combined 70 million yen to a political fund management body for the ruling Liberal Democratic Party, according to a government report.

The finding suggests the LDP has been ignoring an instruction issued in the Diet in February 2003 by Prime Minister Junichiro Koizumi, who doubles as LDP president, that the party should refrain from receiving political donations from ailing businesses. But an official of the LDP’s political fund management body said, “It is not illegal for loss-making companies to make donations.”

The 25 companies include high-tech giant NEC Corp. and contractor Penta-Ocean Construction Co.

The official claimed that the organization was unaware of Koizumi’s instruction. The political funds law bans donations by firms that have turned in losses for three straight years.

According to the report, Penta-Ocean provided 13 million yen to the LDP last year, despite failing to pay dividends for two straight years.

NEC provided 10 million yen in September after skipping dividends in fiscal 2002.

The other 23 companies, including construction firms and industrial machinery makers, made donations in various amounts up to 9 million yen.

Penta-Ocean declined comment on its donations.

An NEC official said the company decides whether to donate based on business conditions, adding it could stop providing the money if suspension of dividend payments continues for a certain period. NEC did not pay dividends in fiscal 2002, but resumed them the following year.

In February 2003, the Fukui District Court ordered a former president of troubled contractor Kumagai Gumi Co. to pay 28 million yen in damages to shareholders for illegal political donations to the LDP.

Kumagai Gumi was found to have donated 87 million yen to the LDP in the late 1990s while logging hundreds of billions of yen in losses. The court said the former president should have examined the company’s business conditions more thoroughly before making such donations.

Following the court order, Koizumi said at the Diet that corporate managers must remind themselves that they should not make political donations when their companies are unable to pay dividends.