Mitsubishi's run of misfortune continues after the problems at Mitsubishi Motors. This time, an embezzlement case has come to light at Mitsubishi Electric.
In connection with maintenance work for an online Shinkansen reservation system, the Metropolitan Police Department has decided to arrest, as early as the 8th, a man in his 50s, a former employee of Mitsubishi Electric (Chiyoda Ward, Tokyo), on suspicion of fraud for repeatedly placing fictitious orders and defrauding his employer of approximately ¥20 million. This was learned through interviews with investigative sources. The remainder is omitted. (Asahi Shimbun, 2016/6/8 (Japanese))
The man was reportedly seconded to Mitsubishi Electric from another company. As usual, the wrongdoing came to light through an investigation by the national tax authorities.
The national tax authorities can also investigate the other parties to transactions, so their rate of detecting wrongdoing is high.
That said, Mitsubishi Electric is a listed company, so it should have internal and external audits. Was its ability to police itself weak?
The amount of loss that was substantiated and led to an arrest was ¥20 million, but Mitsubishi Electric's internal investigation reportedly found that the total losses involving the former employee were approximately ¥460 million. There have also been reports that multiple employees were involved in this matter, so ¥460 million presumably does not mean the amount that went into the pocket of the person arrested this time. The method that has come to light was fictitious outsourcing for maintenance work on a system called "Express Reservation," jointly operated by JR Central and JR West: payments were made to another company and the money was then transferred back to the employee's own account and embezzled. It was reportedly used for entertainment expenses.
However, something does not add up. An employee on secondment had authority to place orders worth tens of millions of yen. Would a long-established, prestigious listed company make such a mistake? Employees on secondment usually have authority only at about the level of a rank-and-file employee. An exception would be a joint-venture company in which all employees are basically on secondment; in such cases, they have the same authority as regular employees. When an employee on secondment makes a decision to outsource, the business partner is investigated carefully. This is because secondees are more likely than ordinary employees to be used in crime or unfair competition. For example, if an employee of Company B is seconded to Company A and actively directs orders from Company A to Company B, Company B profits. Conversely, Company A makes decisions that lack economic rationality, reducing its competitiveness. It also seems odd that colleagues or internal auditors failed to detect the problem despite losses of as much as ¥460 million. Incidentally, this matter came to light in 2013, so this is information that had already been reported quite some time ago. Perhaps the other ¥440 million, apart from the ¥20 million, could not be the subject of a criminal complaint because the company itself also had serious shortcomings in its management.
Additional note (2016/6/28)
On the 28th, the Metropolitan Police Department decided to arrest two men on suspicion of fraud for their involvement in similar fictitious orders: a former president in his 70s of a subsidiary that handles the company's IT-related business, and another former Mitsubishi Electric employee. [Passage omitted] In 2009, the former president and others are suspected of having made it appear that maintenance work for a Shinkansen ticket-reservation system, which JR Central (Nagoya City) had contracted out to Mitsubishi Electric, was outsourced to a computer-related company in Yokohama City, thereby defrauding the company into paying approximately ¥40 million in outsourced-work fees. The money fraudulently obtained was allegedly channeled back from the fictitious contractor to the former president and others. The remainder is omitted. (Asahi Shimbun, 2016/6/28 (Japanese))
At the time of the first reports, I felt that something did not quite add up, but it seems the crime involved people acting together within the organization.