The government needs to fully account for the problems in its sale of a tract of public land in Osaka Prefecture to school operator Moritomo Gakuen, now that the Board of Audit has concluded that the plot was sold at a steep discount based on faulty estimates of the amount of industrial waste that needs to be removed from the site. It must take the report by the government watchdog seriously since it concerns the sale of state-owned property at a price far below its fair value.

The report released last Wednesday by the Board of Audit does not delve into why the questionable discount was offered to the school operator. Suspicions that the steep discount was offered in view of the close ties between the head of Moritomo Gakuen and Prime Minister Shinzo Abe’s wife, Akie, who served as honorary principal of a new school that was to be built on the site, have not been dispelled. It is not within the watchdog’s power to investigate what lay behind the shady transaction. It’s the duty of the Abe administration to investigate and publicly explain why the deal went down the way it did.

Moritomo Gakuen signed a contract with the government in May 2015 to lease the 8,770-sq.-meter plot in the city of Toyonaka for the construction of a new elementary school. In March last year, the school operator told the Finance Ministry, which takes charge of transactions of state-owned land, that it found the waste buried underground during construction work, and offered to buy the land outright. The Finance Ministry then requested the land ministry, which owned the plot, to estimate the amount of waste and calculate the cost of removing it from the site.

As a result, the plot was sold to Moritomo Gakuen for ¥134 million — after ¥820 million was deducted from its appraisal value of ¥956 million as the expense for removing the waste. However, the Board of Audit, which was commissioned by the Upper House to look into the appropriateness of the deal, determined that the West Japan Civil Aviation Bureau of the Land, Infrastructure, Transport and Tourism Ministry grossly overestimated the size of the problem, noting that the amount of waste that must be removed may in fact have been 30 to 70 percent of what the bureau estimated — which was the basis for the sharp discount.

In its report, the Board of Audit did not specify what should have been the proper expense for disposing of the waste, on the grounds that it couldn’t make a precise estimate because some of the documents used by the bureau to calculate the cost have reportedly already been destroyed by the Finance Ministry.

The Board of Audit’s conclusion rekindles doubts over the repeated assurances by the government that the property sale to Moritomo Gakuen was processed properly based on relevant laws. The questionable discount cannot be explained away as a sloppy estimate of the waste or poor management of relevant documents. Media reports have suggested that an official in charge of the transaction at the Finance Ministry’s Kinki Local Finance Bureau had asked Moritomo Gakuen in advance how much it could pay for the plot — and that the bureau had been in talks with Yasunori Kagoike, head of the school operator, over the purchase price, with Kagoike pressing the bureau to sell the plot at a price as close as possible to zero. It is questionable whether the discount was indeed calculated on the basis of the estimated cost of removing the waste.

While reiterating that the land sale to Moritomo Gakuen was a legitimate transaction and denying that advance discussions were held with the school operator over the price, officials at the Finance Ministry have refused to provide further explanations on the grounds that official records of its communications and negotiations with Moritomo Gakuen have already been destroyed, in accordance with its own rules on the management of official documents. That likewise raises questions over the proper handling of official records from the perspective of being able to review and verify the government’s decision-making process.

In response to the Board of Audit report, Chief Cabinet Secretary Yoshihide Suga said the government will conduct more careful research and examination in future transactions involving state-owned property. The government should start the effort now by reviewing the process behind the questionable deal with Moritomo Gakuen. The watchdog’s report must not spell the end of story.

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