Prosecutors are duty bound to start a fresh, no-stones-unturned investigation into allegations of financial misconduct against three former executives of Kansai Electric Power Co. following a citizens prosecution inquest panel’s common-sense ruling that the individuals deserve to be indicted on criminal charges.

Prosecutors need to offer convincing answers to questions raised by the randomly selected citizens with regard to their decision to drop the cases against the utility’s former executives.

After scrutinizing dubious financial schemes to compensate for losses suffered by board members, the Osaka No. 2 prosecution inquest panel decided that the actions taken by the three executives--former president Shigeki Iwane and former chairmen Shosuke Mori and Makoto Yagi--constituted aggravated breach of trust, among other irregularities.

The panel’s ruling means that the Osaka District Public Prosecutors Office is legally required to reopen its case  to judge if the trio should be held criminally liable for financial misconduct. Prosecutors decided last autumn not to pursue indictments.

The allegations against the trio concern financial gimmicks to compenate for pay cuts by board members due to the company’s poor earnings performance, as well as compensation for a former vice president slapped with additional tax after he accepted cash and gifts from a former senior municipal government official in Takahama, Fukui Prefecture, where the company operates a nuclear plant.

The citizens panel decided that the three former officials involved in these two cases deserve to stand trial. The panel also concluded that prosecutors acted “unjustly” when they dropped their cases against a total of 10 Kansai Electric senior officials over allegations that included awarding construction projects to companies linked to the former senior municipal government official in Takahama. Under the law, prosecutors are now required to review the case.

Past Asahi Shimbun editorials questioned the decisions taken by prosecutors with regard to these cases. The panel’s decision is based on reasonable arguments.

It pointed out that the former top executives overstepped their authority when they made decisions on their own regarding compensation for cuts in remuneration for board members, noting that in such instances decisions should first be proposed to a board meeting.

The panel also said the former top executives effectively betrayed customers by applying for government permission to increase electricity charges and then going ahead with paying compensation for executive pay cuts. Even if the company’s collusive ties predated the dealings with the influential local official, the panel contended, rightfully, that the top executives were responsible for correcting any related dubious practice that occurred before they took up their positions.

With regard to compensating the directors for their losses in remuneration, tax authorities determined in July that the sums amounted to “hiding income” and ordered the company to pay a heavy additional tax, which it did. The decision by Osaka prosecutors to drop the cases without conducting a “compulsory investigation” provoked doubt and distrust among the public.

In addition to questioning those involved again, the panel also called for “digital forensics” investigations into related in-house emails and other digital materials.

Prosecutors need to understand the gravity of the panel’s unusual demand for a specific approach to inquiries in urging them to get to the root of the scandals.

Kansai Electric’s response to the panel’s decision called its attitude toward the allegations into question.

The company issued a statement saying it is not in a position to make a comment on the decision because it is not a party that is directly involved. Indeed, the company as a legal entity is not subject to the panel’s ruling. But it is outrageous for the company to behave as if it had nothing to do with the affair.

The fact is that many of its broad members, including top executives, committed highly questionable, and potentially illegal, actions with regard to the company’s nuclear power business.

As a matter of priority, the company’s management needs to engage in serious soul-searching and reform its corporate culture. The panel’s decision repeatedly referred to Kansai Electric as “a company of a highly public nature.”

The utility’s commitment to its responsibility will be tested by how it deals with the damages lawsuit it has filed against the accused former executives.

Working in tandem with shareholders who filed a separate legal action to hold the former executives accountable for their deeds is the logical and appropriate place to start the process of reforming and rebuilding the company.

--The Asahi Shimbun, Aug. 4