• Kyodo

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The Fukui District Court on Wednesday ordered a former president of Kumagai Gumi Co. to pay 28 million yen in damages for endorsing the struggling contractor’s political donations to the Liberal Democratic Party while the firm was effectively in the red.

Presiding Judge Takuo Ohara ruled that donations between 1998 and 2000 were extended without sufficient screening and then President Yoshio Matsumoto failed to meet his obligation as a board member to make cautious decisions.

According to lawyers for the plaintiff, Kazuyoshi Yuoka, this is the first case in which an ailing firm that made political donations was found to have thus acted illegally.

Yuoka, a shareholder in the firm and a member of an ombudsman group, had sought a total of 87 million yen in damages from four past presidents of the construction firm.

According to the court, Kumagai Gumi donated some 87 million yen to the People’s Political Association, the LDP’s fund body, over a period of four years starting in 1996. The company meanwhile logged one-time losses of 242.6 billion yen in 1997 and 577.1 billion yen in 2000.

Lawyers for the plaintiff argued that taking into account the devaluation of assets following the popping of the bubble economy, the firm would have logged losses every year since 1995. This situation would make the LDP contributions a violation of the law regulating political donations, which bans firms from making such contributions if they are operating in the red for three consecutive years.

They also argued that since a national-level election was held every year from 1996 to 1999, Kumagai Gumi’s donations were de facto election campaign funds. The Public Offices Election Law bans firms with contracts with the government from making such contributions.

The defense countered by claiming official book-closing figures show that the company was not in the red for three years straight and that the donations did not constitute campaign funds, because contributions were made to the fund management body on a continual basis.

In handing down his ruling, Ohara said that even if the firm was not in the red for three straight years, contributions should be seriously reviewed with regard to any impact they might have on business operations.

LDP Secretary General Taku Yamasaki reacted to the ruling later in the day by saying it would be difficult for the party to accept political donations from companies while their financial conditions are under scrutiny, even ignoring the impact of the donations on shareholders.

Yamasaki added that the LDP has already decided not to accept financial contributions from ailing firms that have received debt waivers.

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