Was giving out unlisted stock to lawmakers and prominent businessmen
really constitute bribery?
The defendant is still rich, with his company flourishing. This case,
in a sense, was something almost a "perfect crime."
A sentence was given to Hiromasa Ezoe, former chairman of Recruit.Co.
who had been charged with bribery. He was found guilty, sentenced to
three years in prison, with a 5-year suspension. I believe the judges'
conclusion was appropriate, but the court was criticized for taking
13 years in reaching the sentence. I would like to review why.
Generally speaking, it is said that it would be better to concentrate
court proceedings and determine the defendent's sentence as soon as
possible, since the legal punishment would give the person who had committed
the crime necessary social sanctions. However, this argument is sometimes
off the point. The defendant, regardless if he/she is bailed out or
detained, suffer wide variety of social disadvantages by criminal accusation.
Therefore, speeding up the court procedure would likely to shorten this
period of negative social attention and disadvantages against the defendants.
That should be a welcome move.
In addition, speeding up court procedures could increase the risk of
false accusations, which benefits nobody. Do we wish to go back the
time to the past and choose classic court-martial, where if the defendant
is found guilty, then firing squad awaits him? No. We are more likely
to approach the truth and thus the most appropriate legal assessment
if the court provides necessary time for the defendant to bring counter
argument. Court proceedings should go as deep as possible to look and
expose the background of each case. That would bring forth lessons to
be learnt.
It took 13 years not because Ezoe attempted to prolong the case. During
the course of the proceedings, Takao Fujinami, former Chief Cabinet
Secretary under Prime Minister Noboru Takeshita's cabinet was found
not guilty at a Tokyo District Court ruling. He had been charged with
receiving bribes from Ezoe. Judges and prosecutors dealing the Ezoe
case slowed themselves down the proceedings to be more careful. I believe
it is the prosecutors to blame. They had accused Ezoe of distributing
unlisted stocks as bribes. The court ruled Ezoe's action to be guilty
of bribery. We must think over the ruling. What was Ezoe's real target?
Recruit Co., a company which Ezoe first launched in 1960 as an advertisement
agency, was aiming to deal "information" as its chief resource,
a concept which had never existed in Japan until then. Unlike the major
newspapers and publishing companies, whose main aim had been to enlighten
people, looking down at them from high places, Ezoe's company targeted
at people's interests. His company first published magazines specializing
classified ad on jobs. Ezoe was very good at making people obliged to
feel they would miss a great deal unless they read the magazine.
When he established the company he was a student at the University
of Tokyo. He put together magazines that concentrated on corporate profiles.
Acquiring sponsors, the magazines were distributed in the university.
Ezoe possessed detailed knowledge on classified ad magazines published
in the United States, and saw a huge advantage in launching the business
in Japan.
If conventional newspapers and magazines should be labeled as ethereal
business, magazines published by Recruit.Co were the product of material
business. Ezoe sought the new idea as his ultimate weapon and attempted
to construct his empire base on information. Information makes money.
If he was able to manipulate information at his own will, vast amount
of concessions could be produced in his favor. For example, he could
sell a specific piece of corporate information to its rivaling company
at high price. Or, could use pieces of information in order to gain
in the stock market. If he manages to possess information concerning
privacy of lawmakers and business leaders, he could use the information
for blackmailing, which would bring further concession in his favor.
Ezoe wanted to rule the Japanese establishment by arming himself with
information.
However, such an ideal is not so easily achieved. Of course, the existing
powers dealing with information, mainly newspapers and publishing industry,
tried to fight him off vehemently. In order to brush them off as much
as possible and survive, he selected a methodology, consequently putting
him in jail. It is ironic that acquiring unlisted stocks and eventually
earn a fortune had been a traditional way of moneymaking in the Japanese
establishment. Until the Recruit scandal unfolded, nobody has ever been
charged guilty of moneymaking concerning unlisted stocks.
Then why was Ezoe charged? I believe there is a big significance.
I believe that the Special Investigation Department of the Tokyo Public
District Prosecutors Office, an arm of prosecutors specializing mainly
in bribery cases committed by lawmakers, was trying to show the public
that they could hold authorities over business sector as well. The scandal
unfolded in 1988, when Japanese economy was at the height of the asset-inflated
"bubble" economy. There were apparently rise in number of
scoundrels attempting to make money at the time, out of real estate
and stock market. The prosecutors busted Ezoe to show those people they
could also be legally jeopardized. After the recruit scandal, the jurisdiction
exercised by the Special Investigation Department has broadened considerably
over the years. The prosecutors successfully gained their grounds.
I must tell you what made Ezoe truly great was that he did not use
cash but stocks to climb up his ladder of success. Looking at differently,
stocks are merely pieces of paper. Their value is only produced after
investors purchase them. Therefore, the market paid off the lawmakers
on Ezoe's behalf. If he had used cash, he could easily accused of bribery,
but he must have planned it so that distributing stocks would be difficult
to constitute bribery. In fact, during the court proceedings, the prosecutors
argued that "providing someone with unlisted stocks that had high
possibility to rise rapidly as soon as they are listed constitute bribery."
This really did not make sense because stocks do not always have high
possibility to rise rapidly.
Ezoe's tactics was an alchemy only made possible in the stock market
boom of the 1980s, when all the listed stocks enjoyed continuous surge
in their prices regardless of the actual corporate achievement. Therefore,
we could refute that what Ezoe had done may not be illegal. For example,
if somebody attempted the same thing as Ezoe did today, when Tokyo market
is very sluggish, few people would believe that the offered stock, even
if it's unlisted and reasonably priced, would rise in the market when
it's listed. You don't want to purchase something that is likely to
become trash, do you? Prosecutors would definitely have difficulty indicting
someone under such circumstances. In addition, nobody suffers economic
damage by the act. Let's compare with a series of bribery which rocked
the nation's major construction companies in the early 1990s. People
in the construction business attempted to corrupt national and local
lawmakers to receive costly public works contracts for their companies.
It is the taxpayers who eventually had to pay the bill, so we could
see them as victims. But look at the Recruit scandal. It was stocks,
not cash, that mattered. Investors do not give a damn whether the money
comes from lawmakers or not. The important thing is to make profit from
anyone who wishes to sell.
In addition, readers of magazines published by Recruit Co. had nothing
to do with the scandal itself, since the quality of published items
would not deteriorate rapidly even if the company managed to achieve
stronger political connection. Maybe it is possible to blame Recruit
Co. that their magazines sell well and eventually damage other publishing
companies, but those companies are losers in the free market economy.
So, the court's decision to suspend Ezoe's prison term was an appropriate
one. The prosecutors are likely to be relieved to make Ezoe guilty.
In other words, the court ruled Ezoe guilty to save the prosecutors'
face.
Anyway, I think Ezoe firmly believed that what he had done was his
only chance of getting a ground in the Japanese establishment's iron
triangle of government-business-bureaucracy. But at the same time, what
he thought was the legal borderline was not quite correct and sentenced
him guilty. I have heard from sources that he was showing sentiment
of remorse recently, but deep down in his heart, he had done it with
strong conviction. Ezoe is now 66 years-old. Although he has retired
from running his company, he is still a very rich man, and Recruit Co.
continued to expand after his fall by the scandal. So this is a very
rare case in the criminal history of Japan, and I think this is very
close to a perfect crime.
