TIME: Almanac 1993/TIME Almanac 1993.iso/time/042489/04248900.025

Text File | 1992-09-23 | 8.4 KB | 161 lines

                                                                                WORLD, Page 37

JAPAN

A Scandal That Will Not Die


Despite loose ethics, the Recruit fiasco may topple Takeshita


    He licked his lips. He sipped water. His ashen face looked
aged. The strain was evident as Prime Minister Noboru Takeshita
faced his challengers in the Diet. The embattled Japanese leader
made a series of extraordinary admissions to a special session
of the Diet budget committee. Last October Takeshita flatly
denied any connection to the burgeoning scandal that has linked
dozens of Japanese politicians and bureaucrats to a
money-and-favor game played by the Recruit Co., a $3.25 billion
information-and- real-estate conglomerate. But last week
Takeshita conceded that over the years he and others close to
him received nearly $1 million from Recruit. Referring to his
October disclaimer, Takeshita pleaded a faulty memory: "I
probably did not have a clear recollection of the matter then."

    In the wake of the Prime Minister's latest disclosures,
opposition members intensified their demands that he step down.
"Your hands are dirty," charged Socialist Diet member Kanji
Kawasaki. Takeshita, 65, refused to do so, vowing instead to
reform the system. To his critics, Takeshita declared, "I have
no intention of taking a quick way out of this crisis."

    Though Takeshita appeared determined to grit through the
crisis, the spreading scandal -- the country's most pervasive in
modern times -- may yet topple his Liberal Democratic Party
government, much as a series of financial misdeeds brought down
Prime Minister Kakuei Tanaka in 1974. Since Recruit's
involvement in influence peddling among the political bigwigs
first came to light in the press last June, 20 people have been
forced to resign, including three members of Takeshita's
Cabinet. The list of those implicated, numbering 155, includes
not only L.D.P. and opposition politicians but also prominent
members of Japan's powerful government bureaucracy,
businessmen, academics and newspaper executives. If Takeshita
should survive the scandal, the main reason will be that all the
L.D.P. leaders are similarly tainted.

    Ethics and politics -- can the two go together? It sometimes
seems not. In an eerie parallel to the trials of U.S. House
Speaker Jim Wright, Japan's leading politicians are under fire
for misunderstanding -- or missing -- the connection. In both
countries, the lines are often hard to draw, as changing
standards of morality are applied to the fuzzy world of
campaign financing.

    For Japan, the Recruit scandal is raising profound questions
about kinken-seiji, or money politics, and the way Japan
conducts its public business. On one level the issue is simple
bribery. Recruit's mercurial founder, Hiromasa Ezoe, 52, nine
other businessmen and three officials of the Labor and Education
ministries have been arrested for alleged bribery or violation
of securities law (so far no charges have been filed against any
elected politician). But on another level the question is
whether Japanese politics is so blatantly suffused with the
passing of cash that it is practically impossible for
officeholders to avoid the appearance, if not the actual
commission, of impropriety. Said Takako-Doi, chairwoman of the
Japan Socialist Party: "The Diet as well as politicians have
lost the trust and confidence of the public."

    The constant stream of fresh disclosures, overshadowed only
briefly by the death and funeral of Emperor Hirohito, has proved
costly for Takeshita. Last week the popularity rating of the
Takeshita Cabinet hovered around 10%, a postwar low. The Prime
Minister's fall from public grace comes only partly from outrage
over Recruit. The Japanese also bitterly resent a new 3%
national consumption tax, part of a reform package that will
eventually reduce taxes. In several recent local elections,
these issues have badly hurt the L.D.P., which has been in
power continuously since the party's formation in 1955. No less
partisan an observer than Shintaro Ishihara, a senior member of
the party's right wing, admits that if elections were held now,
"it would be suicide for the L.D.P."

    Recruit was founded as an advertising-sales agency by Ezoe
in 1960 with an investment of $2,000. Acting in accordance with
his favorite slogan, "Money Comes First in This World," Ezoe
built the three-man shop into a corporate behemoth, branching
into real estate, supercomputers and restaurant and hotel
management as well as a variety of information services. Stock
in the expanding conglomerate was closely held until October
1986, when shares in its real estate subsidiary, Recruit
Cosmos, were publicly listed on Tokyo's over-the-counter market.
Those shares became a new and virtually cost-free vehicle for
peddling influence.

    For nearly two years before going public, Ezoe and other
Recruit officials commonly offered stock shares at about $20 to
selected individuals, many of them in the Diet and the
bureaucracy. Once the stock started trading on the open market
and soared in value, many of the recipients sold their shares,
reaping hefty profits. Frequently, the transactions were
recorded in the names of aides or relatives.

    Aides and relatives of Takeshita and his predecessor, former
Prime Minister Yasuhiro Nakasone, are known to have purchased
shares of Recruit Cosmos -- 12,000 and 29,000 respectively. Both
men deny personal involvement. Those transactions, Takeshita
declared last week, were "their personal dealings, not mine."

    What's wrong in all this? In Japan distributing stock before
a firm goes public is not illegal; in fact, many newly formed
companies routinely ask banks and other firms to purchase a
portion of their unlisted stock before the public sale to
prevent market volatility once it is trading. But prosecutors in
the Recruit case intend to prove that the offers in many cases
constituted bribes in exchange for anticipated political and
business favors. If the prosecutors find evidence of a political
quid pro quo, recipients could be charged with accepting bribes.

    While Takeshita maintains that he did not profit from stock
deals, he did finally acknowledge receiving from Recruit sizable
gifts in other forms. The Prime Minister conceded that in 1986
and 1987 the company donated $259,000 to his political
organizations. He also admitted that Recruit bought more than
$570,000 worth of tickets to two fund-raisers held for him in
Tokyo and Iwate prefecture in May 1987. Such contributions are
not illegal, but these may have exceeded legal limits imposed
after the Tanaka scandal.

    Japan is no different from other industrialized countries in
permitting individual and corporate contributions to
politicians, parties and causes. But the amounts allowed in
Japanese politics are large by any measure, and the system has
long tentacles. Takeshita, like other L.D.P. faction leaders,
used the huge sums he raised to aid the political careers of
lower-ranking members in his faction.

    Diet members of all ranks, moreover, are routinely expected
to ante up for their constituents at weddings, funerals and
other rites of passage. A survey of 89 Diet members by the
daily Asahi Shimbun showed that each spent about $4,200 a month
on an average of seven weddings and 27 funerals. Thus, despite
the call by Takeshita and others for campaign-financing reform,
University of Tokyo political scientist Takashi Inoguchi
remains pessimistic. Says he: "How can we carry out reforms when
even the voters are getting money?"

    Reforming the system could take a very long time. More
immediately, Takeshita is eager just to get the Recruit scandal
behind him. For one thing, the Diet's opposition forces are
holding hostage the nation's budget, which should have been in
place April 1. They refuse to debate it until the L.D.P. agrees
to allow Nakasone to testify under oath about his role in the
Recruit affair. For another, Takeshita must set a date for
elections to the Diet's upper house by Aug. 13, and in the
poisonous atmosphere created by Recruit, the L.D.P.'s chances of
winning the 54 seats it needs to retain a majority are less than
certain. Finally, Takeshita's own lease on party and government
office comes due in October, and he wants to reclaim it for
another two-year term. Should he fail to do so, the Recruit
fiasco could be the reason. April may yet prove the cruelest
month for Noboru Takeshita.