It came to light that one person had been embezzling funds.
If an organization has a culture in which embezzlement can occur, might there be more embezzlement that has not come to light?
There was news that gave the impression of just such an example.
Embezzlement was uncovered repeatedly at NHK ITEC, an NHK subsidiary.
The amounts were relatively large, and the cases came to light in the course of tax investigations. The tax authorities’ ability to investigate wrongdoing really is impressive.
Billing for Things That Did Not Exist: A Department Manager Embezzled Funds Through Fictitious Business Trips and Entertainment
It was learned on the 30th that a male department manager in his 50s at NHK subsidiary NHK ITEC had been required to resign in April for improper accounting totaling approximately ¥2.4 million, including fictitious business trips and fictitious entertainment expenses. He is said to have already repaid the full amount. NHK established an investigation committee last year to examine all of its subsidiaries, but this issue was not found. (Asahi Shimbun, 2015/6/30 (Japanese))
He inflated expenses and submitted claims. At ¥2.4 million, the amount was not large.
If April’s dismissal was reported in June, had it gone unannounced until someone leaked it?
Approximately ¥200 Million Embezzled Through Fictitious Orders to Contractors and Other Means
NHK subsidiary NHK ITEC announced that, in the course of a Tokyo Regional Taxation Bureau tax investigation, it had become clear that two employees were suspected of embezzling approximately ¥200 million by methods including placing orders for construction work on broadcasting-related facilities with companies that had no actual operations. NHK ITEC said it would continue to cooperate with the bureau’s investigation, conduct an internal investigation together with NHK, and consider filing a criminal complaint.
Omitted.
NHK established an emergency investigation team and, while working with NHK ITEC to clarify the facts, urgently instructed NHK ITEC to confirm whether its other business partners were real companies and to establish a system for checking whether transactions had actually taken place.
Of ¥400 million in orders, ¥200 million was fictitious. That is a fairly high proportion. How did no one notice?
In well-run companies, an investigation of the company serving as a contractor is conducted either by a specialist team that does not place orders or by the administrative department.
They consider systems that prevent mistakes and wrongdoing (technically called internal controls), so that the person who initiated an approval request cannot complete the process alone.
Unless there is a fundamental change to the organization this time as well, it will likely continue in the future.
(Added January 7, 2016)
According to information disclosed by NHK and NHK ITEC on the 7th, an internal investigation newly found that, during 2014–2015, the two people allegedly forged documents concerning individual-visit work for measures to address poor reception associated with the transition to terrestrial digital television. They allegedly improperly withdrew approximately ¥48 million in contract fees from an organization operated with Ministry of Internal Affairs and Communications subsidies, and embezzled approximately ¥4.3 million of that amount.
It was also learned that a male deputy department manager in his 50s at the Kyushu branch was suspected of embezzling approximately ¥5 million during 2014–2015 by, among other things, placing fictitious orders for work.
Another case of embezzlement has also emerged. It appears that funds from subsidies for measures addressing poor reception were embezzled. The person reportedly says the reason was financial hardship. The position was deputy department manager, and NHK employees have an average annual income of ¥11.85 million, so although he should have been receiving a reasonable amount, I find it hard to believe that he would take the risk of embezzling ¥5 million. Perhaps he yielded to temptation, or perhaps there is more to it. It seems necessary to take firm action to prevent recurrence and change the organizational culture, including filing criminal complaints.
As shown above, even repeated investigations will not end wrongdoing if the response is only superficial.
I think this case shows that a business owner’s job is to understand the underlying problem and put systems in place to address it.