The former head of a nationalist school operator and his wife, who were at the center of a cronyism scandal linked to Prime Minister Shinzo Abe, were found guilty Wednesday of receiving ¥56.4 million ($512,000) in central government subsidies illegally for the construction of an elementary school.
At the Osaka District Court, Yasunori Kagoike, the 67-year-old former chief of Moritomo Gakuen, was also convicted of unlawfully receiving local government subsidies and sentenced to five years in prison. His 63-year-old wife Junko was given a three-year jail term suspended for five years.
The two were convicted of defrauding the central government of the ¥56.4 million between March 2016 and February 2017, by overcharging for the construction of an elementary school in Toyonaka, Osaka Prefecture, on land purchased from the government.
They had also been indicted for unlawfully receiving around ¥120 million in subsidies from the prefecture and the city of Osaka between fiscal 2011 and fiscal 2016, by inflating the number of teachers at their preschool.
Yasunori Kagoike was found guilty on that indictment, while his wife was acquitted.
Prosecutors had sought seven-year prison terms for both of the defendants, saying they planned the fraud and instructed the company that built the elementary school — which applied for state subsidies on their behalf — to defraud the state.
The couple had plead not guilty, with their defense team arguing that the main part of the contract process, such as setting the land price and compiling related documents, was carried out by the company that applied for the subsidies.
“The making of the false contract was agreed in a meeting attended by both defendants, the construction company and a design firm,” said Presiding Judge Takushi Noguchi.
The companies had to advance the process due to the defendants’ strong desire to receive a large amount of subsidies, he said in handing down the ruling.
Earlier in the day, the defense counsel had claimed there was a mistake in the prosecutor’s argument that the local government subsidies illegally received by the school operator were yet to be returned.
The defendants argued that the prosecutors’ demand for punishment should have taken into account that they had already paid back ¥900,000 to the prefectural and the city governments, and that they had submitted a plan to return the remainder. But the prosecutors did not change their demand for a seven-year term for each of the pair.
The couple were arrested in July 2017 after it was revealed that Moritomo Gakuen had purchased the land in Toyonaka the previous year for ¥134 million, despite it being valued at ¥956 million.
The heavily discounted sale sparked cronyism allegations against Abe because his wife Akie was acquainted with the Kagoikes and named as an honorary principal of the elementary school. She stepped down from the post in the wake of the scandal.
During the trial, Kagoike said he became acquainted with Akie through a parent of his school around 2011 and that he received ¥1 million from Akie in 2015, quoting her as saying that “it is from Prime Minister Shinzo Abe.” Abe has denied giving him the money.
Although the Finance Ministry punished 20 officials, including Nobuhisa Sagawa who led the ministry’s bureau that was in charge of the land sale, over the falsification and destruction of documents related to the land deal, prosecutors did not indict any officials over the incident.