Sunday, October 4, 2009

Akiyama Under Arrest; Japanese Witch Hunt?

Defense News


Akiyama Under Arrest; Japanese Witch Hunt?

By Wendell Minnick

TAIPEI - Naoki Akiyama, considered a mover and shaker within Japan's defense industry, may never recover the influence he enjoyed before his July 24 arrest, some sources say.

Tokyo prosecutors allege that Akiyama, executive director of the Japan-U.S. Center for Peace and Cultural Exchange and director of the Congressional National Security Research Group, hid $2 million in consultancy fees and from 2003 to 2005 and evaded $680,000 in income tax. Prosecutors allege the money was hidden in three U.S. companies owned by Akiyama. Prosecutors claim one company signed contracts listing a former executive who died in 1994.

The investigation began in 2007, when accusations were made that the Tokyo-based Yamada, an arms trading company, was involved in document forgery, fraud, bribery, overbilling and bid-rigging. Former Yamada executive Motonobu Miyazaki and former Vice Defense Minister Takemasa Moriya were indicted for bribery.

Akiyama's influence and reputation likely will never recover from the arrest, and much of the blame rests on his odd mix of academia, defense procurement, military policy and politics.

Ayaka Takahashi, Akiyama's assistant at the Congressional National Security Research Group, admits Akiyama wore many hats and easily crossed from academia into business and back.

"It is a fact that he has introduced consultants and former officials to companies, but in most cases, the companies asked for such introduction, and he introduced various people to various companies, depending on the scale," Takahashi said. "There were cases in which the company's side was delighted to have been able to keep the contracting price down. There are politicians and groups that their names should have appeared on this case, and Mr. Akiyama thinks that the true problem lies there."

However, Akiyama himself points to his bizarre link with the Yamada scandal, including the discovery that Miyazaki, a former director of Akiyama's Japan-U.S. Center for Peace and Cultural Exchange, had connections to a North Korean nonbanking financial institution.

"This was because the examination revealed that Mr. Miyazaki's house was kept as collateral by a North Korean-affiliated nonbank, and it seemed to us that his new company was facing some problems," Akiyama said. "A company which seeks to handle the security issues of our nation, should not be allowed to deal with the North Korean affiliates, not even indirectly."

One U.S. defense contractor in Tokyo believes Akiyama had a dark side.

"I'd bet he knows where the skeletons are buried. He always has his hand out for a fee, and [now] he's radioactive, probably will never recover his prior influence," the contractor said. "He has axes to grind."

Christopher Hughes, author of the book "Japan's Re-emergence as a 'Normal' Military Power," points to Akiyama's tentacles in every facet of the Japanese defense community.

"The Japanese authorities' investigation of Akiyama is important because it hints for the first time at the potential depth of the emerging military-industrial linkages between Japan and the U.S.," he said.

Akiyama believes this latest investigation is nothing more than a witch hunt - one aggravated by the failure of prosecutors to find him guilty in connection with the Yamada scandal.

"It all started with Yamada's internal conflict when the former executive managing director established a new company, and Yamada took action in order to discourage this new company's activities," Akiyama said. "The District Public Prosecutors Office took this case as a great chance - it had long wished to deal with the issues concerning the right and interests of defense."

Takahashi agreed: "When the scandal of Mr. Moriya and Mr. Miyazaki [was] revealed, the Prosecutors Office believed without a doubt that some politicians were involved in this case. And so they fastened their eyes on Mr. Akiyama, believing that they would be able to reach the politicians related to this issue. However, they were unable to do so, and what they are doing now is taking measures not to lose their face.

"Until recently, they had been trying to accuse Mr. Akiyama of the breach to the Foreign and Exchange Law, but failing this attempt, now they are accusing him of the violation of income tax law," Takahashi said. "This is outrageous, and it is such a shame that newspapers cover issues that have no evidence. This is nothing but an abuse to our group and the members of congress supporting our group."

Hughes believes the Yamada scandal has shaken Japan's defense establishment and has been a positive force for change.

"Although Akiyama is still under investigation, his case and that of Moriya/Miyazaki [in connection with the Yamada scandal] has forced the MoD to begin an overhaul of its procurement procedures from the U.S. and other overseas contractors," Hughes said. "Japan has traditionally relied on Japanese trading companies to act as the intermediary in purchasing equipment. However, the suspicion is that these companies have tended to 'pad out' contracts in order to increase their profits made on the cost price and the price charged to Japan as the customer."

Although the Ministry of Defense most likely will continue using trading companies, it is seeking greater transparency in "pricing and contracts to try to avoid overdependence on intermediaries that may be acting more for their own, or foreign, or U.S.-Japan industrial interests than the Japanese government as their customer," Hughes said.