Japan’s Ministry of Defense issued a final report detailing a more than 40-year scheme in which the country’s shipbuilders collected fraudulent payments that funded equipment used on the country’s submarines and gifts to members of the Maritime Self-Defense Force. The Ministry apologized to the country and said it is disciplining 93 members, including the Vice Defense Minister, supervisors, commanding officers, and submarine captains.
The investigation began after an audit by the Osaka Regional Taxation Bureau discovered issues with the finances of Kawasaki Heavy Industries, which, along with Mitsubishi Heavy Industries, is the main builder and repair yards for the country’s submarines and defense force. The report cites KHI for widespread involvement but says MHI, Japan Marine United, and Sasebo Heavy Industries were also involved in the fraud to a lesser degree.
The report says the scheme could be traced back to 1985 with Kawasaki Heavy Industries. The shipbuilder was reported to have been involved in fraudulent transactions and to have created a “slush fund” valued at over $11 million in the last six years. The shipbuilders submitted fraudulent bills for supposed repairs to the submarines to the government.
Kawasaki they found used some of the money to fulfill requests from submarine crewmembers for items such as refrigerators, heating units, or repair materials that were not submitted as official requests but were being used on submarines. However, they also uncovered a pattern of gifts given to members of the Defense Force. The report details 13 crewmembers and supervisors who received personal items unrelated to their duties. Valued at over $9,000, they said the gifts included gaming consoles, golf equipment, and watches. One person was reported to have received almost $3,300 worth of gifts.
Nearly $3 million was paid to subcontractors. Kawaski reportedly also used a portion of the money to purchase personal items and beer coupons.
The other shipbuilders were also involved, but the report said they mainly fulfilled requests from personnel from the Maritime Self-Defense Force. This was for items to be used on the submarines, such as monitors or chairs.
Among the 13 individuals receiving the personal gifts, three were supervisors who determined the repairs required for the submarines. They were also responsible for overseeing the suppliers. The Ministry said it would be taking separate punitive actions against those individuals.
“We deeply apologize for causing a scandal that has greatly undermined expectations and trust,” said Chief of Staff Admiral Akira Saito at a news conference on Wednesday, July 30. “We will create an atmosphere in which members can say wrong things are wrong.”
Saito will lose 10 percent of his salary for one month and receive an official reprimand. Vice Defense Minister Kazuo Masuda was also strongly reprimanded for not properly overseeing the Chief of Staff.
A total of 73 supervisors and two commanding officers received reprimands. A total of 17 submarine captains received warnings.
KHI, earlier this year, was ordered to pay more than $6.6 million in taxes related to the scheme. The report, however, found that the shipbuilders were mostly responding to requests from the members of the Maritime Self-Defense Force. As such, the shipbuilders are not being excluded from future dealings with the Defense Force and the Ministry.