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A document leak shows that former executives of a unit run by KDDI Corp. strongly resisted changing auditors before suspicious accounting came to light and led to their arrest in 2015.

The documents, obtained by a group of international journalists, suggest along with the unit’s records that three former executives of Hong Kong-based DMX Technologies Group Ltd., including its CEO at the time, were involved in false transactions with Chinese firms via two entities set up in the British Virgin Islands, a known tax haven.

The documents, dubbed the “Paradise Papers,” are similar to last year’s “Panama Papers” and were obtained by the German newspaper Sueddeutsche Zeitung and shared with the International Consortium of Investigative Journalists.

Kyodo News and other media outlets are partners with the ICIJ.

A total of 13.4 million records were leaked, many from Bermuda law firm Appleby, which has branches in tax havens around the world, including the British Virgin Islands.

After the auditor was changed to one that KDDI had a contract with in 2014, suspicious accounting practices at DMX Technologies came to light and two of the three executives were arrested by Hong Kong police the following year. The telecommunications firm reported an extraordinary loss of ¥33.8 billion in the fiscal year ended March 2015 in connection with the matter.

The leaked documents and other records indicate the three executives engaged in false transactions and the information technology company failed to recover a large sum of accounts receivable, leading parent KDDI to report the extraordinary loss.

Back in 2012, KDDI sought to change DMX Technologies’ auditor to the one it had a contract with. But one document shows the chairman and CEO “emphasized” in a meeting that the move “may have negative impact on the share price of the company and KDDI would suffer the substantial impact if this happened.”

It took more than a year before the auditor was changed. Two of the three former executives were involved in operating entities in the British Virgin Islands.

KDDI told Kyodo News that it could not confirm the alleged false transactions via the entities in the tax haven. KDDI also said the motives behind the irregular accounting were not clear because it has not questioned the officials. The CEO and others did not respond to questions from Kyodo.

The registered office of DMX Technologies is in Bermuda, a British island territory also known as a corporate tax haven. KDDI made the company a subsidiary in 2009.

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