Kyoto public prosecutors have arrested Mr. Noboru Okubo and his eldest son Hiroshi, the respective former chief and deputy chief director of the Japan Kanji Aptitude Testing Foundation, on suspicion of causing a loss of ¥260 million to a public-interest corporation through shady deals with companies led by themselves. They could be charged with a breach of trust.

In fiscal 2008, some 2.86 million people sat for the kanken (kanji certification) tests sponsored by the foundation. Despite the arrests, it plans to carry out a kanken test in June. The foundation, now headed by Mr. Akio Kioi, a former head of the Japan Federation of Bar Associations, needs to do its best to regain the trust of people. The education ministry, which approved the kanken body as an incorporated foundation under its jurisdiction in 1992, also needs to examine itself since it was so late in detecting the irregularities.

The foundation’s murky business deals with four companies headed by either the elder or younger Okubo came to light in January 2009. Since fiscal 1992, it has paid, without approval by the board of directors, some ¥25 billion to the firms.

The foundation made profits of ¥880 million in fiscal 2006 and ¥660 million in fiscal 2007. Its internal probe committee has found that an average of 80 percent of sales at the four firms came from transactions with the foundation.

From September 2005 to January 2009, the foundation placed orders to about 20 firms for ads and other business operations. But it is suspected that the Okubos had Media Box, one of the four firms in question, pose as the agent for the contracts, and had the foundation send ¥260 million to it, ostensibly for its services.

The father-son pair and two other relatives reportedly received ¥150 million from Media Box as remuneration for serving as executives and ¥50 million in stock dividends during a five-year period through May 2008. The foundation needs to take a number of corrective steps, including strengthening its internal controls, lowering test fees and doing everything it can to retrieve the lost assets.

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