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Mr. Noboru Okubo and his eldest son have resigned respectively as chief director and vice director of the Kyoto-based Japan Kanji Aptitude Testing Foundation over irregularities related to its operations, including the accumulation of unusually large profits for a public-interest corporation and opaque business transactions with four firms headed by Mr. Okubo or his eldest son.

In fiscal 2008, some 2.86 million people sat for the kanken (kanji certification) tests sponsored by the foundation, which was established in 1975 by Mr. Okubo. It also holds the annual “Kanji of the Year” event at Kyoto’s Kiyomizu-dera Temple.

In a report to the education ministry, which oversees the foundation, the foundation promised to lower test fees, include lawyers and certified public accountants among trustees and introduce external auditing, among other things. But the foundation needs to do more to regain the public’s trust.

The foundation made profits of ¥880 million in fiscal 2006 and ¥660 million in fiscal 2007. The value of its assets increased from ¥5 billion at the end of fiscal 2004 to ¥7.35 billion at the end of fiscal 2007. Since fiscal 1992, it paid, without the approval of the board of directors, some ¥25 billion to the four firms as fees for the work entrusted to them.

It is reported that from fiscal 2006 to fiscal 2008, three of the four firms racked up about ¥3.5 billion in profits by subcontracting the work to other firms and paying them fees that were lower than the payments they had received from the foundation. Mr. Okubo, his eldest son and three other relatives are reported to have received about ¥530 million as salaries from the four firms in the same three-year period.

Lawyers say that the transactions with the four firms have led the foundation to lose some of its assets. But the foundation says that it will continue to do business with two of the four firms, which account for most of the transactions. Public prosecutors, suspecting breach of trust, have reportedly launched an investigation into the case. A thorough restructuring of the foundation, including a complete severance of ties with the Okubo family, is needed, and if it is found that the Okubos breached any laws, they should face prosecution accordingly.

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