Bid-rigging probe into Japanese rail contracts

posted by Su-San Sit
in Law
13 December 2017

A fraud investigation into Japanese construction firm Obayashi has spread to other major contractors as prosecutors probe contracts related to a ¥9tn ($79.3bn) super high speed magnetic levitation (maglev) train project.

The Tokyo District Public Prosecutors Office (TDPP) said those being voluntarily questioned include workers from multiple construction firms, including leading contractor Kajima. Obayashi and Kajima are two of the elite group of five dubbed “super-general contractors” in Japan.

Atsushi Fujino, Kajima spokesman, confirmed that prosecutors are questioning company staff over its involvement in contracts for the train line, but would not specify which one.

Shinya Nino, Obayashi spokesman, also confirmed that prosecutors searched its headquarters in Tokyo and other sites over the weekend.

He said Obayashi is being probed for a contract it won jointly with Toda Corp and Japan Rail Tokai Construction in April 2016 to build an emergency exit for the maglev station planned in Nagoya as part of the planned Linear Chuo Shinkansen Line.

The contract requires the companies to build an emergency staircase, ventilation and sound-deadening facility by September 2019. It is one of four contracts Obayashi won from Central Japan Railway with its join venture partners in October 2015.

The TDPP said it suspects Obayashi obstructed Central Japan Railway’s bidding process by making separate pricing arrangements with other contractors in the maglev project.

The value of the contract in question has not been disclosed.

The maglev project is set to link Tokyo, Nagoya and Osaka through a next generation shinkansen (bullet train) line for magnetically levitated trains travelling as fast as 500km/h.

Services on the 286km stretch from Tokyo to Nagoya are set to begin in 2027, cutting the 88mins trip to just 40mins. The line is expected to be extended to Osaka in 2037.

The prosecutors said they have already questioned Obayashi executive vice president Kozaburo Tsuchiya, who oversees the civil engineering unit, and an official at its Nagoya office.

Responding to TDPP's statement, Nino confirmed an executive vice president had been questioned but said he and other officials have denied any involvement in the alleged fraudulent acts.

“We will fully cooperate with investigators,” he said.

A representative of JR Central and Toda said to date prosecutors had not contracted them.

Japan’s manufacturers have been plunged into the spotlight after an admission in September by Nissan that technicians had been conducting final inspections that they were not authorised to conduct. Kobe Steel then revealed it had falsified quality data on metal products shipped to more than 500 customers.

Since then, carmaker Subaru admitted similar problems to Nissan, while Mitsubishi Materials and Toray Industries also revealed workers had falsified quality data on product shipments.

 Want to stay up to date with the news? Sign up to our daily bulletin.

CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates