Obayashi Seeks Leniency by Admitting Bid-Rigging

December 20, 2017

Tokyo- Obayashi Corp. officials have admitted their involvement in prearranging with three other firms winners of orders tied to a 9-trillion-yen project to build Japan's first magnetic levitation Shinkansen train line, informed sources said Tuesday.

The Obayashi officials admitted the misconduct to trustbusters, apparently in the hope of utilizing the leniency program for those that voluntarily report their wrongdoing.

The officials, including a 66-year-old vice president for civil engineering operations, also said that such prearrangements were conducted in all of the 15 contracts won by the four firms, also including Taisei Corp. Kajima Corp. and Shimizu Corp.

On Tuesday, public prosecutors and trustbusters raided offices of Taisei and Obayashi on suspicion of violating the antimonopoly law through unfair restraint of trade, over the project to open the ultrahigh-speed maglev train line between Tokyo and the central Japan city of Nagoya in 2027.

The raids by the Tokyo District Public Prosecutors Office's special investigation squad and the Japan Fair Trade Commission followed their searches of Kajima and Shimizu conducted Monday on the same suspicion.

Under the leniency program, the first company to report misconduct before being investigated for alleged violation of the antimonopoly law will be granted full immunity from fines and criminal prosecution. The second through fifth companies are eligible for reduced fines.

In the maglev train project, led by Central Japan Railway Co. <9022>, or JR Tokai, 22 construction contracts have been inked since August 2015. Of the 15 contracts, three or four went to each of the consortia led by the four major general contractors.

Some orders were shared. An order to build a tunnel under the Minami Alps mountain range in central Japan was won by the groups led by Kajima and Taisei, while an order to establish a new station under the Tokaido Shinkansen line's Shinagawa Station in Tokyo was awarded to the consortia led by Obayashi and Shimizu.

The Obayashi officials initially denied wrongdoing, saying that the four companies happened to win similar numbers of orders because they have strengths in different fields, the sources said.

The officials later switched to admitting the prearrangements among the four companies to ask for the application of the leniency program to Obayashi, according to the sources.

Obayashi declined to comment on whether the company sought leniency, but said it will fully cooperate with the authorities.

It emerged that officials of the four companies who participated in the prearrangements had met with each other as members of a group of the Japan Federation of Construction Contractors that holds a gathering once a month.

Some of them may have been acquaintances before joining the group. But the participants in the prearrangements are likely to have used such occasions to develop their friendly relations, the sources said.

The prosecution suspects that the group meetings led the officials to get involved in bid-rigging.

Taisei admitted to being investigated and pledged full cooperation. Jiji Press