Police arrest head of failed travel agency Tellmeclub

Police on Wednesday arrested the president and a former employee of failed travel agency Tellmeclub, which offered budget overseas tours, on suspicion of defrauding a bank of about ¥200 million ($1.76 million) in loans by window-dressing earnings data.

The travel agency, headed by 67-year-old Chikako Yamada, filed for bankruptcy in late March with debts of close to ¥15.1 billion, after collecting roughly ¥9.9 billion in advance payments from between 80,000 to 90,000 customers across Japan.

Yamada and Toshiyuki Sasai, 36, who was in charge of accounting, admitted to the allegations, which included the forging of earnings statements presented to Sumitomo Mitsui Banking Corp. between June and September 2016, according to the police.

The two are suspected of fraudulently securing the loans on the pretext of chartering aircraft, despite the firm’s poor financial condition that eventually resulted in postwar Japan’s fourth-biggest tourism industry bankruptcy.

The Tokyo-based tour agency started window-dressing its financial statements by posting fictitious profits the previous business year, even before it fell into negative net worth in the year through September 2014, according to its bankruptcy administrator.

Tellmeclub, which was established in 1998 and once thrived on online reservations, found it increasingly difficult to provide budget tours to destinations such as Hawaii and Guam due to rising advertising and labor costs, as well as a weaker yen that pushed up its foreign-currency denominated payments.

At a meeting attended by hundreds of creditors on Monday, Yamada said, “I was the one issuing the management instructions. After telling lie after lie to financial institutions, we tried to extend our sales.”

Many creditors expressed anger as Yamada said the company has not yet determined the total amount of claims against it and may return less money to customers than previously expected.

A 64-year-old actor from Yokohama, Kanagawa Prefecture, near Tokyo, paid about ¥300,000 for an April tour to Hawaii last November but had to reserve a tour offered by other company at a similar price after Tellmeclub went bankrupt.

“It would be best if I could get my money back, but I may be able to gain closure emotionally if the president’s responsibility is made clear,” he said, adding that the industry should make sure nothing like this ever happens again.

Until it failed to meet the payment deadline to secure air tickets, the company kept receiving 1,000 to 2,000 new reservations per day and collected advance fees for tours.

But the company suddenly announced on its website that it was suspending operations and filed for bankruptcy in March. The move caused an outcry from customers who had made reservations through the agency, as they are expected to receive a refund amounting to only about 1 percent of what they paid.

Tellmeclub scrambled to survive by launching various tour plans with discounts that were deemed “impossible” to generate profits, according to a tourism industry source.

With the aim of boosting sales, it kept running online and newspaper ads until late March, but the unrealistic prices meant the measure ultimately backfired.