On July 20, the special investigation squad of the Tokyo District Public Prosecutors Office indicted without arrest three former executives of Mitsubishi Hitachi Power Systems, Ltd. (MHPS), headquartered in Yokohama, in a case involving the bribing of an overseas public official. This was the first instance in which the Japanese version of plea bargaining, also known as a negotiation and agreement system (see below), was applied. The prosecutors did not indict the company as a corporate entity. What are the significant features and challenges involved in this new system as revealed by this case? The Yomiuri Shimbun spoke with three experts: a lawyer specializing in corporate legal affairs, a jurist who was involved in the drafting of the system, and a former prosecutor with the special investigation squad. The following are excerpts from the interviews.
(From The Yomiuri Shimbun, July 22, 2018)
Opportunity to boost companies' legal compliance
Mitsubishi Hitachi Power Systems, Ltd. has been able to avoid indictment as a corporation through its self-declaration of a crime that investigative authorities were unaware of, and through its full cooperation in the subsequent investigation.
The decision of the company to opt for plea bargaining was appropriate in that it demonstrated the company's high level of capability for self-correction over a scandal and enabled the company to protect its value.
Plea bargaining is definitely effective in investigating organized crime by gangs and fraud rings. However, I have argued for some time that the investigation of corporate crime, particularly cases of bribery of overseas civil servants such as this one, would become the main battlefield of plea bargaining.
Payments of bribes overseas often occur at the discretion of local staff who are too far away to be under the supervision of the head office. Despite its lack of involvement in the fraud, a head office will suffer greatly if the company is prosecuted. It can be expected that more companies that have learned of wrongdoing will be eager to make a speedy declaration to investigative authorities and seek plea bargains in order to avoid such risks.
On the prosecution's side, the advantages of being able to get full cooperation from the company through plea bargaining are immeasurable. To date, there have only been five cases, including this one, where Japanese investigative authorities have made indictments over bribery overseas. Thus, Japan has been criticized by the international community for not doing enough. The Tokyo District Public Prosecutors Office's special investigation squad is sure to increase crackdowns on bribery cases through plea bargaining in the future.
One thing that corporations can learn from this case is the importance of building compliance systems. If companies take the lead to carry out compliance education in a thorough manner, it will be easy to gain understanding among the general public with regard to the company trying to avoid being charged by reporting to investigators about its employees who have been involved in wrongdoing. Conversely, if a company should take a passive approach to compliance education, it would be difficult to get the public to accept that the company has demonstrated self-corrective mechanisms, irrespective of how much it may appeal to investigators about wrongdoing by its employees.
On the other hand, it can also be imagined that an employee who has committed wrongdoing runs to the investigative authorities before the company's internal investigations take place in hope of easing the criminal charges that would be made against the employee. The most distressing situation for a company would be to be suddenly subject to an investigation, completely ignorant of anything that has occurred. To prevent catastrophic damage, companies need to perfect their internal reporting systems and set up systems for fast and accurate internal investigations.
Companies that lack self-corrective mechanisms must not be permitted to exploit this system and evade their own criminal responsibility by turning employees and trading partners over to investigators. Each and every company should take this opportunity to get serious about compliance that will eliminate illegal acts from taking place in the company.
-- This interview was conducted by Yomiuri Shimbun Staff Writer Mariko Tsubai.
-- Tadashi Kunihiro / Lawyer
Kunihiro was registered as a lawyer in 1986. He serves as external director and external auditor in several companies, including companies listed in the First Section of the Tokyo Stock Exchange, and has expertise in corporate legal affairs and crisis management. In 2015, he served as a committee member of the Economy, Trade and Industry Ministry's study group on the prevention of bribery of foreign public officials. He is 62.
Utmost caution needed against false statements
In the country's first case of plea bargaining, MHPS was exempted from prosecution, while individuals involved with the case were held responsible for criminal charges. Discussions at the Legislative Council -- an advisory body to the justice minister that compiled a draft report on plea bargaining -- were based on a presumption that one of the model cases in plea bargaining would be a type in which individuals receive dropped or reduced criminal charges as major players in the deal. At first glance, I was surprised that the first plea bargain was applied to a case that is not even solely domestic, but I have realized the prosecutors reached the decision after a serious process of consideration.
A plea bargain system was introduced as a new investigative measure in response to a tougher situation around obtaining statements due to a series of criminal justice system reforms including expanded use of audio and video recordings during investigations. Through discussions at the Legislative Council, concerns were raised that individuals cooperating with investigations might give false statements in the hope of facing lesser criminal charges, leading the investigation to mistakenly charge innocent third parties.
In the MHPS case, a plea bargain was reached based on the report by a big corporation with social credibility, so we can presume it is unlikely that a false statement was made. In addition, the special investigation squad of the Tokyo District Public Prosecutors Office requested mutual investigative assistance from a Thai counterpart. It is believed that they have acquired evidence such as the investigators' records of oral statements from related parties to prove the crime. The possibility of false charges is very unlikely. All elements suggest that the special investigation squad selected the case for the first plea bargain with utmost caution.
Regarding the MHPS case, the special investigation squad was able to obtain sufficient evidence from the company through its internal investigations to prosecute the former executives. Using this case as a prototype, hopefully it will prompt other companies to consider utilizing plea bargains in a bid to expose similar corporate crimes, which will enhance the level of compliance.
It is true that there has been criticism that it is unjust to let the company go unpunished even when it must have profited through the criminal acts of its employees. Prosecutors need to pay serious attention to such views. We must not forget the essence of the plea bargain system: It aims to put pressure on senior officials and companies connected with crimes by rewarding lower-ranking employees, not punishing them, when they make statements to investigators.
The plea bargain system also applies to crimes such as bank transfer scams by gangsters and fraud rings. In contrast to the MHPS case, in which a major corporation is involved, it should expect higher risk of false statements by those cooperating with the investigation. Prosecutors should pay extremely close attention to collecting evidence in support of statements and exert the utmost efforts to apply the plea bargain system in a just and proper manner.
As the application of the system increases without causing false charges, even along with some trial and error, people will come to support it and consider the plea bargain system as a useful tool to investigate organized crime, which has been difficult to prosecute up until now.
-- This interview was conducted by Yomiuri Shimbun Staff Writer Tatsuya Hoshino.
-- Takayuki Shiibashi / Professor Emeritus of Chuo University
Shiibashi specializes in the Code of Criminal Procedure. He served as a member of the special subcommittee for the Legislative Council, an advisory body to the justice minister, from 2011 to 2014 and as chair of the Japanese Association of Victimology, which conducts research on victims of crime. He is 71.
Special investigation should find own clues
This case diverges from the original purpose of plea bargaining, which aims to investigate systematic crimes and crimes committed by the top echelons of organizations.
It is possible for companies to stamp out the wrongdoing that runs rampant within them and call attention both internally and externally to their self-correction mechanisms. By escaping prosecution, it is also possible for the company to protect itself from economic disadvantages such as the suspension of bidding. Naturally, investigations become easier for the prosecutors as well, as the company will compile all the evidence and present the prosecutors with the case.
However, what will happen if these kinds of cases increase? While companies will come to be proactive about bringing fraud to the attention of investigative organizations, we will also see an increase in "cutting the tail off the lizard," where only the employees that were directly involved in the fraud bear criminal responsibility and the company is left able to survive. While it may appear natural to some in this day, when we have heard calls for strengthening compliance, I wonder if we will be able to get the public to understand a situation where a company that must have made a certain amount of profit from the fraud carried out by certain of its employees then betrays those very employees and tries to save its own neck.
When investigating a case that has taken place overseas, extremely high hurdles must be cleared in order to gather evidence. It is vital to have the cooperation of local investigative authorities, and language barriers also exist. This is to say nothing of bribery cases, where investigations to prove that public officials have received bribes become all the more difficult because local agents act as intermediaries. Both of the two overseas bribery cases where the special investigation squad laid charges in the past were cases where Japanese employees handed bribes to local public officials directly.
In this case, it is believed that the special investigation squad has utilized the plea bargaining system to acquire evidence from a company that normally would have required time-consuming interactions with Thai authorities via the diplomatic route. With regard to the bribing of overseas public officials, the Organization for Economic Cooperation and Development (OECD) has repeatedly pointed out that Japan has exposed a very limited number of offenses, so this case was also one of responding to international demands. Also considering that those indicted were former executive members in positions of responsibility rather than employees on the periphery, the case can be evaluated in a positive light to a certain extent.
However, what is demanded of the special investigation squad is that it tries to and has the ability to find clues to cases on its own, that it gathers physical evidence and testimonies, and that it exposes "great evil." If the squad conducts investigations arising from plea bargaining, its reason for existence will fade away.
Traditional investigation methods only make use of plea bargaining in cases where it is proving difficult to get results. These methods are all about aiming to clarify the overall picture of complex organized crime. If this system can build a history of such cases, it can be expected to take root as a system that is trusted by the people.
I would like for prosecutors to carry out their mission of eradicating social evils, staying mindful of the basics of investigation as they carry this new "weapon" of plea bargaining.
-- This interview was conducted by Yomiuri Shimbun Staff Writer Shunpei Takeuchi.
-- Yasuyuki Takai / Former Prosecutor, Special Investigation Department
Takai was appointed a prosecutor in April 1972. He was in charge of the Recruit corruption case while part of the Special Investigation Department of the Tokyo District Public Prosecutors Office. Registered as a lawyer after his retirement in 1997. Answered questions in 2015 as a ruling-party-recommended unsworn witness to the House of Representatives Judicial Affairs Committee, which discussed bills on criminal justice reforms such as the introduction of plea bargaining. He is 70.
-- Negotiation and agreement system
A system whereby suspects and parties subject to investigation testify about the crimes of others with the consent of the prosecution in return for having their own legal penalty lessened. The system deals mainly with organized crime, such as bank transfer scams, and economic crimes such as bribery. In crimes for which corporations can be punished, it is possible for a company to become the subject of plea bargaining.
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