Photo/Illutration Kawasaki Heavy Industries Ltd.'s shipyard in Kobe, where it builds and repairs submarines for the Maritime Self-Defense Force (Nobuhiro Shirai)

A full picture has emerged of a systemic scam that was perpetrated by Kawasaki Heavy Industries Ltd. to maintain “mutually beneficial” relations with submarine crew members of the Maritime Self-Defense Force.

The details were included in the reports issued on Dec. 27 by a special investigative committee of KHI and the Inspector General’s Office of Legal Compliance of the Defense Ministry. 

In a nutshell, KHI created a slush fund with bogus submarine repair transactions with its subcontractors, using the money to entertain and buy gifts for MSDF submarine crew members.

The total value of such transactions reached 1.7 billion yen ($10.7 million) in six years up to fiscal 2023. The gifts included items that could be used aboard submarines, such as lighting fixtures, cold weather gear and portable refrigerators, as well as personal hobby items such as game consoles and golf equipment.

Money was also spent on food and drinks served at social gatherings.

This custom of entertaining and gifting is believed to have been going on for at least 40 years.

Bribery and collusion have often accompanied the procurement of defense equipment. Under the slogan of “fundamental reinforcement of defense capabilities,” the government is proceeding with a plan to invest 43 trillion yen in the next five years.

But the government cannot hope to win the support of the public unless it commits to eliminating collusion and ensuring the transparency of all transactions.

During annual and regular submarine inspections, MSDF crew members reside at KHI facilities for a few months and work with KHI staffers. The resulting sense of familiarity may well lead to some blurring of professional propriety, if you will.

But KHI was also reportedly looking to squeeze profits by issuing bogus orders to prevent future contracts from shrinking.

There is no surprise about the Defense Ministry demanding repayment based on calculations of the excess profits. On the other hand, however, there is also the unwelcome fact that some items needed for jobs in submarines are not readily obtainable through legitimate channels.

It was expected that the ministry would include, among its proposed measures to prevent a recurrence of the scam, a review of the supply procurement process.

In its three documents concerning national security, the government has positioned the defense industry as “the epitome of the nation’s defense capabilities” and created a law to enable the state to provide fiscal support to the industry without delay.

And thanks to this massive increase in defense spending, all major defense contractors are flourishing now.

Taking the KHI scandal as the cue, the Defense Ministry ordered 100 defense-related businesses to self-check their operations.

Even though none reported bogus transactions or giving money or gifts to SDF members, about 30 companies received low ratings for their countermeasures against unlawful conduct.

Further action is needed to eliminate the problem altogether.

The Dec. 27 reports were issued on the last business day before the year-end and New Year’s holidays.

As such, the reports were released along with a number of other reports concerning scandalous cases, such as power harassment by a senior Defense Ministry official, illegal handling of a special secret, unauthorized receipt of allowances for submarine duties, and so on.

For this reason, the KHI-MSDF case calls for a detailed government report, not to mention a thorough discussion, during the upcoming regular session of the Diet, of the background of the scandal and how to prevent a recurrence.

The law to support the defense industry has the backing of the opposition Constitutional Democratic Party of Japan, Nippon Ishin (Japan Innovation Party) and the Democratic Party for the People.

We hope both the ruling and opposition forces will jointly fulfill their responsibilities in examining the relationship between the SDF and the defense industry.

--The Asahi Shimbun, Jan. 8

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