Sekisui House Land Fraud “Chairman Abe knew it was improper” - former head of Real Estate Dept accuses Abe

Weekly Bunshun

Yasuyuki Onishi

April 16, 2020 issue

 

“Mr. Toshinori Abe, President (current Chairman), was aware of content-certified mail warnings before the final settlement of the land transaction.  Also he did not disclose it to the Real Estate Department that I belonged to, and forced the transaction to close.”

 

Mr. Akira Kuroda, formerly with Sekisui House, says.  The land fraud was unveiled in June 2017 and Sekisui House was defrauded of 5.55 billion yen through the transaction.  Mr. Kuroda was head of Real Estate Department at that time.

 

The Real Estate Department reviews the credit of transaction counterparties and conducts due diligence on land purchase and sale contracts.  Unless the Department approves of a transaction, you cannot execute any transactions.  It is like a credit department at a financial institution.

 

For the land fraud, a total of 10 fraudulent landlord group members have been prosecuted, and in March this year Mike Uchida, one of the primary offenders, was sentenced by the Tokyo District Court to 12 years in jail (currently being appealed).  However even almost three years have passed, there are some suspicions that have yet to be resolved -- there might have been a possible cooperation between the swindlers and the current management of Sekisui House.

 

If Mr. Abe was aware of the possibilities of fraud, he may be accused of violation of duty of care as a director or even of aggravated breach of trust.

 

The fraud took place at an old Japanese style inn Kaikikan in Gotanda, Tokyo.  It is at a prime location in Tokyo, only a three-minute walk from JR Gotanda station.  The 2,000 square meter property was well known in the real estate industry in Japan.  The owner was Ms. Sakiko Ebisawa (deceased).  She used to live there even after 2015 when the inn was closed.

 

The transaction was first brought in to Deputy Manager of the Tokyo Condominium Business Department in March 2017 via an acquaintance of Ms. Ebisawa.

 

The lady, who later turned out to be fake, showed her fake passport, seal, and seal certificate to the Department which, including Mr. Kazushi Mitani, then head of the Department and Managing Officer, became eager to pursue the deal.

 

On April 18, 2017, President Abe conducted a site inspection and the project became a “President Project”, and then the transaction started proceeding quickly.

 

They went into a contract on April 24, 2017, and paid an earnest money deposit of 1.4 billion yen.  On June 1, 2017 the remaining and final settlement money of 4.9 billion yen was paid to the swindlers in deposit checks.  Eight days later, the application to register the land transfer was rejected, and the fraud was unveiled.

 

Mr. Kuroda, one of those involved with the transaction, has broken silence while the rest of the people involved remain silent.

 

“From the beginning I kept saying ‘there is something wrong with this transaction.’  But Messrs. Abe and Mitani did not disclose to me all the negative information about the transaction counterparty, and forced me to sign off the deal.  Despite that, Mr. Abe did not resign, and was promoted to Chairman.  All of the four incumbent representative directors approved the deal in the internal approval process.  I thought something has to be done and decided to talk to you about the truth.”

 

Mr. Kuroda first learned of the Gotanda land transaction on April 18, 2017 after the land had already become a “President Project.”

 

“I got a call from a senior manager of the Tokyo Condominium Business Department when I was on a bullet train to Osaka.  He said, ‘it has already been approved by President Abe but I would like you to process an internal approval request, since Messrs Abe and Mitani already inspected the site and the transaction counterparty is in a hurry.”

 

On April 19, 2017, his Real Estate Department received the internal approval request.

 

“I called Mr. Mitani, who said ‘since Mr. Abe already inspected the site, please process the request immediately.’  The following day I went to see Mr. Abe at Osaka Head Office, and asked ‘Have you already approved of this transaction?’ and he said ‘Yes, please proceed and purchase the property quickly’.  Before the rest of the reviewers and approvers, President signed off the deal, which is very irregular.  On April 24, 2017 the payment of an earnest money deposit of 1.4 billion yen was made.”

 

The situation dramatically changed after that.  On May 10, 2017 a content-certified mail warning was received at the Legal Department.  It was sent by the landlord Sakiko Ebisawa.  The letter said “I am the owner of the property.  I was surprised to learn of your preliminary registration of transfer of the land.  I have not entered into any contract on the property, so the preliminary registration must be invalid.”

 

A total of four warnings were received from Sakiko Ebisawa by May 23, 2017.  Her second letter said “I will sue you unless the prelamination registration is removed.”  The third one had her registration number of her seal certificate, and said “the party you are dealing with for the transaction is not me.”

 

The Legal Department immediately shared this with the Tokyo Condominium Business Department, but did not stop the deal.  The Company tried to verify the identity of the seller.

 

“The Real Estate Department was not made aware of the content-certified mail warnings.  But on May 12, 2017, I got a call from president of a real estate company in Kansai area saying ‘is this land transaction okay?’  And I became suspicious. On the same date, a broker came to visit the Tokyo General Affairs Department, and gave them the warning that the transaction was improper.”

 

So Mr. Kuroda called Mr. Mitani and said “Multiple warnings have been received.  Is the intermediary company credible enough?”  On May 18, 2017 Mr. Kuroda called Mr. Mitani again and told him that we should suspend the deal even losing the earnest money deposit of 1.4 billion yen.  However Mr. Mitani would not listen to him saying “the Legal Department is fully involved, so no worries.”

 

Then the Tokyo Condominium Business Department started saying that they would like to conclude the deal early so no interferences are made by outsiders, and changed the final settlement of July 31, 2017 to June 1, 2017.

 

“On May 25, 2017, several employees of Finance & Accounting Department came to see me, and requested that I sign a wire transfer application form for the final settlement money to be wired from the Osaka Head Office to the Tokyo Condominium Business Department.  Since I had suspicions about the deal, I called Mr. Mitani once again and asked ‘Did you really get President’s approval of this?’  Mr. Mitani immediately called President Abe and got back to me saying ‘I have President’s approval’.  And I was told ‘You are the only one left to approve this’ and therefore I approved the wire transfer application.”

 

The final settlement was conducted on June 1, 2017 at a conference room in the Tokyo Condominium Business Department.  The fake Ebisawa was late for the meeting, and did not bring a title certificate of the property.  However Sekisui House accepted advice by the counterparty’s counsel that “the transaction can be registered with an identity verification of the seller.”

 

Another surprising thing happened on the same day.  A Sekisui House employee who was at the transaction site, realizing that the light in the old inn was on despite the landowner is outside of the inn (at the transaction closing meeting), entered the inn, and the police came and asked the employee to accompany to the police.  He called the Tokyo Condominium Business Department and gave them a warning, but those at the closing meeting determined that it was an interference by somebody who did not want to see this transaction closed, and continued with the final settlement.  Multiple deposit checks worth 4.9 billion yen was handed to the swindlers.

 

Mr. Abe is not responsible?

 

On June 5, 2017, when Mr. Kuroda went to see Mr. Abe on a different project, Mr. Abe asked him:

 

“What is going on with that transaction?”

 

“Are you talking about that Gotanda land transaction?  I was concerned since we got multiple warnings.”

 

Then Mr. Abe said:

 

“You know there were 3-4 weird mail messages received.”

 

“?  What are you talking about?”

 

By warnings Mr. Kuroda meant the broker visit and the call from president of a real estate company in Kansai region.  He was not aware of the content-certified mail warnings.  This clearly shows that Mr. Abe granted his approval of the transaction despite his knowledge about the content-certified mail warnings.

 

“Since I was very concerned, as soon as I got back to my desk I called the Tokyo Condominium Business Department.  They said ‘We do not yet know why but the land transfer registration process is now pending.’  I thought we were deceived and I was very shocked.”

 

In September 2017, three months after the land fraud was unveiled, Mr. Isami Wada, then Chairman, established an investigation committee which produced an investigation report, and Mr. Kuroda was interviewed in the process.  The investigation report describes in detail that Mr. Abe and Mr. Mitani forced the transaction.

 

Mr. Wada presented a motion to dismiss Mr. Abe at a board meeting in January 2018.  However the motion was rejected with a 5-5 vote, and in response Mr. Abe presented a motion to dismiss Mr. Wada, who offered his resignation before the motion was approved, knowing that he was going to lose.  Only a summary of the investigation report was disclosed, and its full-text has been covered up.

 

“As I read the investigation report I learned of the content-certified mail warnings.  What Mr. Abe talked about was this.”

 

While Mr. Abe remains in power, Mr. Kuroda, Mr. Mitani, and head of the Legal Department were all dismissed because they were held responsible for the incident.

 

“On March 1, 2018, I was called in by Chairman Abe and President Nakai, and was told ‘A number of media companies have been reporting on the fraud.  I cannot have you with our company any longer.’”

 

He was thrown into despair by their words, and left Sekisui House.

 

“If I had known the content-certified mail warnings, I would not have approved the deal.  I learned later that nobody within the Real Estate Department was made aware of the warnings.  No money can be transferred without approval by head of the Real Estate Department.  Mr. Abe, the Tokyo Condominium Business Department,, and Finance & Accounting Department conspired with each other and they all kept the Real Estate Department out of the loop.”

 

What is Sekisui House’s response to this?  I asked the Company if Mr. Abe had known the content-certified mail, and they answered:

 

“The investigation that we conducted revealed that Mr. Abe had not been aware of the content-certified mail.  He never conducted the deal knowing that there was a possibility of fraud.  Our conclusion was that he did not violate his duty of care, etc.”

 

Even if Mr. Abe had not been aware of the mail, he should be held responsible for the fact that he did the rough-and-ready work on the “President Project”, thereby causing damage to the Company.

 

Mr. Wada has presented a Shareholder Proposal for the general meeting of shareholders to be held on April 23, 2020, seeking to replace the entire management team.

 

Pandora’s Box is about to be opened.