Tax-evasion case reveals connivery behind Kepco's nuclear plant quest

by Gary Tegler

KYOTO — A recent ruling handed down by the Yokohama District Court on a tax evasion case details for the first time the methods employed by major power companies to circumvent national land laws and stymie local opposition to nuclear power plants.

On Dec. 6, Yoshinori Yabe, a 58-year-old brain surgeon in Ebina, Kanagawa Prefecture, was found guilty of evading some 130 million yen in taxes he should have paid for money received in a land transaction on a 100,000-sq.-meter plot of land in Suzu, Ishikawa Prefecture.

The land had been designated as the site for a Kansai Electric Power Co. nuclear reactor, which was also to supply power to Chubu Electric Power Co. and Hokuriku Electric Power Co.

In his defense, Yabe claimed he had been duped by representatives of Kepco, including several former top executives, into signing a contract to take money in the form of loans from real estate companies set up by construction firms affiliated with the plant project. Those companies would later purchase the land outright and then sell it again to the Kepco-led consortium.

Due to stiff local opposition, the energy consortium had been unable to carry out research on the land, as required by law, to determine if the site was suitable for a nuclear plant, and therefore it could not purchase the land.

Yabe told The Japan Times in an interview that he decided to cooperate with the scheme because he had heard former Prime Minister Yoshiro Mori speak about the importance of the Suzu plant project.

“Mori is from Ishikawa Prefecture. He was the minister of international trade and industry at the time (from 1992 to 1993),” Yabe said. “Mori said Suzu was going to become an important district for energy, so I decided to cooperate. I had not lived in Suzu for 40 years and had no need of the land.”

The contract offered by the Kepco people was very complicated, according to Yabe. “They said they couldn’t buy the land outright until the research had been done, and didn’t want to make the deal public due to opposition groups,” he said.

“The money was declared as a loan. Why, I didn’t fully understand. I received the first payments in 1993 and 1994 and reported it to the Tokyo tax bureau. Kepco and Shimizu Corp. came running to me, saying I didn’t have to report the income because the money paid was in the form of a loan. This was 1995.”

Representatives from Kepco and Shimizu who testified in court denied any knowledge of the loan-for-land arrangement, despite Yabe’s bringing into evidence a document filed with the Tokyo tax bureau in 1994. In the document, then Kepco Vice President Hajime Miyamoto stated he had asked construction firms Shimizu, Kumagai Gumi Co., Nishimatsu Construction Co. and Sato Kogyo Co. to divide and eventually purchase the land, because negotiations were in trouble.

Shimizu and Kepco representatives declined to comment on the case.

In his ruling, presiding Judge Hiroshi Yamura of the Yokohama court agreed that Yabe had not acted out of malice but had agreed to an arrangement devised by the “buyers.” He therefore gave Yabe a suspended 18-month prison term and charged him only 30 million yen in fines.

Yabe is appealing the decision, claiming that he has been made a scapegoat by Kepco and that it was at the insistence of Kepco and Shimizu that he declined to report the loans as income.

The site was first proposed for a nuclear plant in 1975 when Suzu city officials, faced with a rapidly dwindling population, approached the central government. Kepco and its Chubu and Hokuriku counterparts formed a joint venture in early 1976, and preliminary soil tests were carried out intermittently over the next several years. By 1989, however, local opposition had halted the testing, which still has not resumed.

Frustrated, Kepco representatives began making secret overtures to Yabe’s family and eventually prevailed upon him to enter into the agreement. They also began efforts to curry public favor, according to Yabe.

“Shimizu set up a nonbank company called SC Capital and began spreading money around in the form of bribes,” Yabe claimed. “The company was capitalized at 2 billion yen, and some money was used to bribe politicians, several of them well known. They also bought people in the local city office.”

Suzu energy chief Takenori Ueno refused to comment on the allegations, claiming he had only learned about Yabe’s case from newspaper reports. He did, however, confirm that the deed for the 100,000 sq.-meter site is still in Yabe’s name.

According to Yabe, a real estate firm called R&M, which no longer exists, was set up by Shimizu to transfer the money to him in the form of loans. The 100,000-meter site was put up as collateral, and, at Kepco’s behest, divided into nine sections to circumvent the national land law, which stipulates that the sale of any land over 10,000 sq. meters must be reported to the prefectural government.

“Kepco tried to obtain this land illegally,” said Susumu Kitano, a prefectural assemblyman representing the region in which Suzu is located.

“It was clear that they had already decided to go ahead with the purchase of the land and divided it up simply to avoid having to report the transaction. Unfortunately, by the time I had begun investigating the case, the statute of limitations for breaching the national land law had expired. Otherwise, I would have brought suit against Kepco and Shimizu.”

Kepco is no stranger to tax evasion cases. In June 1999, Osaka tax authorities found that the company had failed to declare some 2.5 billion yen in income over a two-year period.

For example, the utility had claimed that 500 million yen it had spent on compensating residents living near its nuclear plants was deductible. The court disagreed and Kepco was forced to cough up 1 billion yen in back taxes and penalties.

Suzu remains divided over allowing the plant. Last year, Mayor Osamu Kaizo was re-elected on a pronuclear platform. The power companies involved in the Suzu plant issued a statement at the time saying they were “pleased by the re-election of the incumbent mayor, who supports our project.”

However, according to Kitano, it is unlikely that Kepco and the other companies will be able to go ahead with the plant.

“There are still many people adamantly opposed to the project, including lawyers who have convinced families owning adjacent properties not to sell their land,” Kitano said. “Also, the governor of the prefecture changed in 1993. The current governor has far more respect for people’s opinions than the previous administration.”

The recent revelations regarding the Suzu site are the latest in a series of setbacks for Japan’s nuclear power industry, which has been beset by coverups, accidents — including a fatal one in which safety procedures were systematically sidestepped — and increasing public calls for plebiscites to keep reactors out of their backyards.

The town of Miyama, Mie Prefecture, recently decided to halt negotiations with Chubu Electric Power Co. over a nuclear plant that was to have been built there.

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