Defense Ministry to charge Mitsubishi Electric more than ¥50 billion for bill padding schemes

JIJI

The Defense Ministry is expected to charge Mitsubishi Electric Corp. over ¥50 billion, including penalties, for padding defense contract bills.

On Friday, the ministry said that Mitsubishi Electric overcharged it ¥24.8 billion. Although penalties are still being calculated, the firm probably will be required to pay more than ¥50 billion in penalties — the most ever by a domestic supplier to the ministry.

The ministry learned about the overcharges from a whistle-blower in autumn 2011, triggering probes by the Board of Audit of Japan and other government organizations.

Besides Mitsubishi Electric, three subsidiaries and an affiliate made ¥6.9 billion in overcharges, the ministry said. The companies padded the bills mainly by overstating man-hours logged for supplying the products and services stated in the contracts, the ministry added.

The practice is believed to have started around 1970. Mitsubishi Electric had even set up special terminals to conceal its crimes.

It also padded bills for satellite-related contracts it signed with other public organizations, including the Japan Aerospace Exploration Agency. JAXA says it was overcharged ¥6.2 billion.

Mitsubishi Electric said it will set aside ¥77.3 billion on a consolidated basis to prepare for reimbursements to all parties involved.

The company has hence lowered its projections for the year ending next March to a consolidated net profit of ¥50 billion, down ¥70 billion, it said.

The Defense Ministry said it was also overcharged ¥2.4 billion by Sumitomo Heavy Industries Ltd. and a subsidiary.