Business | FYI: Kepco

A closer look at Kansai Electric and its gift-giving scandal

by Eric Johnston

STAFF WRITER

Earlier this month, Kansai Electric Power Co. concluded that scores of its employees had received cash and gifts worth hundreds of millions of yen from an influential politician in a Fukui Prefecture town where the utility operates a nuclear power plant. The revelations by Kepco’s investigative panel once again showed the dark side of Japan’s nuclear industry.

What is Kepco?

Kepco is the major utility providing electric power to the Kansai region, including Kyoto, Osaka, Nara, Hyogo, Shiga and Wakayama prefectures. With over 20,000 direct employees and 77 affiliated companies, it is one of Kansai’s largest and most influential corporations economically, but also politically. Kepco executives have long held high leadership positions in local business lobby groups such as the Kansai Economic Federation, which played a leading role in convincing local and national politicians, as well as the appropriate ministries in Tokyo, to approve and fund projects ranging from Kansai Airport to the 2025 Expo. Kepco’s largest shareholder is the city of Osaka, which owned about 7.3 percent of Kepco’s stock as of September 2019.

What’s the role of the Takahama plant?

Fukui Prefecture is home to 11 Kepco nuclear reactors at three plants. One of these is the Takahama plant, which hosts some of Japan’s oldest reactors. The No. 1 and 2 reactors are now over 40 years old but scheduled to be restarted later this year. The No. 3 and 4 reactors, which are 35 and 34 years old, are offline and currently being upgraded to better protect against terrorism threats. But construction is running behind schedule and the exact date of their restart is unclear.

In 2010, just before the Great East Japan Earthquake and the resulting nuclear disaster in Fukushima, nuclear power at Kepco’s three Fukui plants accounted for 51 percent of its electricity sources. That figure sat at 29 percent as of the end of the 2018 fiscal year.

What was the scandal all about?

At the center of the scandal is former Takahama Deputy Mayor Eiji Moriyama, who died in March 2019. Since at least 1987, Moriyama had served as a powerful local fixer between Kepco officials and Takahama businesses, giving cash and gifts to Kepco officials in exchange for kickbacks and giving contracts to construction-related firms with ties to Moriyama, which then paid Moriyama a consulting fee.

Kansai Electric Power Co.’s former president, Shigeki Iwane (left) and new president, Takashi Morimoto, hold a news conference on March 14 in Osaka. | KYODO
Kansai Electric Power Co.’s former president, Shigeki Iwane (left) and new president, Takashi Morimoto, hold a news conference on March 14 in Osaka. | KYODO

In one instance in 1987, Kepco needed to purchase some land near the Takahama Nos. 3 and 4 reactors owned by a local marine transport company. Kepco offered about ¥650 million but the firm initially demanded ¥1.2 billion. Due to Moriyama’s intervention, Kepco eventually agreed to pay ¥1.1 billion for the property.

Since the 2000s, the panel documented more than 380 cases where money and gifts were exchanged for the awarding of contracts to Moriyama-connected firms. In October 2019, Kepco Chairman Makoto Yagi resigned, and president Shigeki Iwane announced he would resign (he did so earlier this month) after it was learned they’d received gifts worth around ¥8.59 million and ¥1.5 million, respectively, from Moriyama between 2006 and 2018.

Just how shocking were the revelations?

While the depth of the scandal has surprised many, stories of collusion and bribery in Fukui towns hosting Kepco’s plants are quite common and date back to the 1970s when the first power plants opened.

Thus, for decades, what Moriyama and Kepco were doing was widely suspected but never prosecuted, with even local anti-nuclear activists saying that it would be very difficult to legally connect gift-giving and donations to outright bribery. But Keiichi Tadaki, a former prosecutor general, told reporters after the release of his panel’s report that Moriyama and Kepco had gone too far with the money and gifts in exchange for awarding contracts.

A lack of total surprise over the Moriyama scandal may also be due in part to a series of interviews another former Kepco executive, Chimori Naito, gave to the Asahi Shimbun in 2014. Naito, who died in 2018, claimed to have directed illicit cash payments to prime ministers and key politicians in the ruling and opposition parties between 1972 and 1990 in exchange for favorable legislation regarding nuclear power and electricity policies. Naito’s allegations were never formally investigated. But they created public image problems for the utility, which was aiming to restart as many of its nuclear reactors as it could after 3/11.

What’s next for Kepco?

Kepco has been ordered by the central government to improve its management structure and increase its transparency, as well as bring in more outside directors. Sadayuki Sakakibara, 77, a former chairman of Toray Industries who headed Keidanren (the Japan Business Federation) between 2014 and 2018, has been tapped to serve as the next Kepco chairman following the utility’s annual shareholders meeting in June.

He’ll face a host of problems, including a couple not related to the Moriyama scandal. Kepco has admitted that 18 executives who took pay cuts totaling about ¥1.94 billion between March 2012 and June 2019 due to the utility’s poor performance after 3/11 then secretly received a total of ¥260 million between July 2016 and October 2019 upon their respective retirements, as way to at least partially repay the earlier cuts.

Due to Moriyama’s death, a criminal investigation into his activities is nearly impossible. But with Kepco anxious to restart the Takahama Nos. 3 and 4 reactors as soon as possible but needing to first regain public trust as well as local consent to do so, Sakakibara is already facing questions as to whether there will be a separate investigation of the 18 executives. Kepco has said only that it will seek a return of the money.

In addition, he may face pressure from local media and shareholders to investigate whether Kepco has also received bribes over the years from any local officials connected to other nuclear power plants in the Fukui prefectural towns of Mihama and Oi.

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