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A Call from FBI - Sekisui House AGM - Battle Without Honor and Humanity

Weekly Shincho WEB

April 16, 2020



This year is Sekisui House’s 60th anniversary of the founding.  But the leading housing company in Japan is in turmoil.

A shareholder proposal has been made to Sekisui House seeking to replace the current management including Mr. Toshinori Abe, Chairman at the 69th ordinary general meeting of shareholders to be held on April 23, 2020.

Those who made the shareholder proposal are Mr. Isami Wada, former Chairman and CEO, and Mr. Fumiyasu Suguro, incumbent Director of the company.  They are seeking to elect their own 11 slate directors to replace the current management team.

In response, Sekisui House’s current management announced its opposition to the shareholder proposal, and proposed its slate directors including Mr. Abe.  It is therefore a battle between current Chairman and former Chairman.  It began three years ago when a big fraud scandal was unveiled.

The scandal involved an old inn site in Nishi-Gotanda, Tokyo.  It is in a prime location, only a three-minute walk from the Gotanda station of JR Yamanote Line.  The plan was to develop a 30-story condominium and Sekisui House entered into a purchase contract with a fraudulent landlord group and was defrauded of 5.5 billion yen.

A local news desk reporter at a national newspaper company explains.


“Why did Sekisui House not realize it was a fraudulent transaction?  While the management including Mr. Abe who approved of the land transaction should be held responsible, Mr. Abe was promoted to Chairman in February 2018, and Mr. Wada was forced to resign.”


Sekisui House announced that the promotion and resignation were not related to the fraud incident, but actually at a board meeting of Sekisui House in January 2018, Mr. Wada was ousted.


“I was very disappointed… despite all of my hard work for many years….” recalls Mr. Wada.

“When the fraudulent transaction took place, I was focused on developing new businesses in such countries as the U.S. and China.  The entire Japan business was left to Mr. Abe, and as a result, Sekisui House has become….I regret it.”


“Disclose everything immediately”


Mr. Wada promoted Mr. Abe in 2008 to Representative Director and President of the company.

Mr. Wada became President in 1998, and he managed to grow the company to a 2-trillion yen, #1 single family housing company in Japan. 

He assumed Chairman of an industry organization, and in 2016 received the Grand Cordon of the Order of the Rising Sun from the emperor, but he was ousted by one of his right-hand men.

Mr. Wada said: “I was too naïve, and I regret it.  I learned of the fraud in June 2017 after the fact.  As soon as I learned of it I told everybody that we should disclose everything to the public.”

However, those involved with the transaction were all opposed to it.

“The head of legal department even told me that I should not do so since it will interfere with the investigation by the police.  The current management including Mr. Abe and Mr. Shiro Inagaki (Vice Chairman) would not take any action.  So I asked a senior guy at the police, but he said it would not interfere with their investigation.  I would presume that Mr. Abe and others did not want this to be taken up by the police and that they wanted to get away with it by just recording a special loss for the year.  It took almost two months before Sekisui House made a release on the fraud.  I thought I had to do something, so I set up an investigation committee.”

Then, the coup took place.  The investigation report was finalized before the coup, and it has the following description:

“As Chief Operating Officer, he should be heavily responsible for the fact that he did not grasp the overall picture of the transaction and did not recognize significant risks.”


Definitely a money laundering


The current management has yet to disclose the full-text of the report, saying that it is because of concerns about counterfeiting of the "land fraud incident", and the confidentiality of criminal investigations.

In the shareholder derivative lawsuit against the management, the company has continued to resist disclosing the investigation report, even when ordered by the court.  Since the company’s appeal was rejected it submitted the report to the court, but the report available for viewing and copying is masked.

The biggest mystery is where the lost money of 5.5 billion yen went.

A total of 10 fraudulent landlord group members including Mike Uchida, the primary offender, have been prosecuted, but the group got only a few hundreds of millions of yen, and nobody knows where the vast majority of the money Sekisui House had lost went.  The law enforcement agencies in Japan have not been able to elucidate the incident details.

Mr. Wada said that the FBI of the U.S. has developed its interest and started its investigation.

“On March 19, I got a call from the FBI.  I cannot give you its details, but I spoke with them with my lawyer and an interpreter present for almost an hour, and answered all the questions.  I sensed that the FBI is very serious.  Since we do not know where the lost money went, the FBI said that it is definitely a money laundering.”

As the investigation report describes, Sekisui House paid the land purchase money to an intermediary shell company in deposit checks.

“We rarely work with an intermediary shell company and rarely use deposit checks – we use bank wires to settle a land transaction.  The deposit checks were multiple – 7 or 8, with the largest one being for more than 3 billion yen.  The checks were cashed instantly at MUFG Bank.  Given that the current management’s involvement with the improper transaction and its subsequent cover-up, Sekisui House may have to discontinue its business in the U.S.”

International Shareholder Services and Glass Lewis of the U.S. who advise institutional shareholders that account for 30% of the total shareholdings recommended to vote against Mr. Abe and Mr. Inagaki.  Mr. Wada and Mr. Suguro have been recommended to vote for by Glass Lewis.

These voting advisory firms have a large influence on voting decisions by shareholders.  Since the company can expect its group companies and partner companies to vote for them, everybody thought that the company would have a better chance than the dissident but now it is not clear.


"Because the current management team was involved in the land fraud."


Hideaki Kubori, a lawyer well-versed in corporate governance, is one of those who have been interested in the issue.

"As some media articles have been reporting, in certain aspects Sekisui House was not a mere victim in the land fraud incident.  For example, there is a chance that they did not act properly when they were aware that it was a fraud."

"And we don't know where the lost money went.  With this you can call this a money laundering case.  It is because usually you use bank wires so you can keep track of the money you paid.  It is money laundering as far as the lost money has not been located, even if no terrorists or anti-social forces were involved."

"I have heard that the revised Board of Directors rules of Sekisui House define board convener and chairman of the board by personal names -- Mr. Abe as board convener, and Mr. Inagaki as chairman of the board.  I have never seen anything like that.  If the convener and the chairperson are defined by personal names, they will continue to have the authority even after they reach their retirement age as representative directors.  The mandatory retirement age becomes meaningless."

"The United States may be seeing the land fraud case as an absurd incident that involved Sekisui House, Japan's top housing company, and MUFG Bank, Japan's top bank.  There must be serious allegations against MUFG Bank.  It was MUFG Bank that issued and helped the swindlers cash the deposit checks for the settlement."

If the current management team remains in power at Sekisui House,

"There is a risk that the credibility of Japanese companies as a whole will decline in the U.S.  It may lead to Sekisui House not to be able to be listed on a U.S. stock exchange."

"The rules on money laundering are much more stringent overseas than we think.  In fact, Glass Lewis and ISS have concluded that the current management team of Sekisui House lacks the qualifications to serve as a director.  I think shareholders need to know this.  Because the current management team was involved in the land fraud."


Weekly Shincho WEB Coverage Team (Published: April 16, 2020)

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