Ripple effect of Rakuten Mobile embezzlement case threatens subcontractors’ survival

The Rakuten logo is seen in this photo taken on June 11, 2019. (Mainichi)

TOKYO — A suspected case of embezzlement by a Rakuten Mobile Inc. employee and figures at a pair of the mobile giant’s business partners is threatening the survival of those partners’ subcontractors, triggering layoffs and unpaid wages.

Rakuten Mobile announced on Sept. 2, 2022 that it had fired the employee involved in the case. According to sources close to the matter, the employee is believed to have colluded with executives and other figures at business partners Nippon Logistech Corp., based in Tokyo’s Chiyoda Ward, and Trail, based in the capital’s Minato Ward, to pad their bills with fake consulting fees and other costs. Damages are said to total 4.6 billion yen, or around $35.5 million. After the employee’s illicit actions came to light, Rakuten suspended transactions with the two companies, and an application to the court for the provisional seizure of their savings was recognized. The fallout was swift and sharp.

On Aug. 31, two days before a wave of layoff notices, supervisors and prime contractors began telling their workers and subcontractors all over Japan — at mobile phone base station construction sites, at component warehouses, and other places besides — that “there will be no work starting tomorrow,” and “Our contract was terminated by Rakuten Mobile.”

Rakuten had hired Nippon Logistech Corp. to manage and transport components for putting up base stations, and Rakuten orders accounted for over half of its revenue. The company had no choice but to apply for bankruptcy procedures under the Civil Rehabilitation Act shortly after its bank account was seized by court order. Building Rakuten base stations also comprised a hefty portion of Trail’s business, and the firm had to suspend operations when the mobile giant cut them off. As a result, the many subcontractors under these two companies have been driven towards the brink of bankruptcy.

Shinwa, based in Fukuoka Prefecture, is one of them. It had been contracted by Trail to build base stations for the entire Kyushu region, but in late August 2022 a Trail employee suddenly ordered it to “stop construction and immediately leave the sites.” Trail told the subcontractor that he could not make a payment of some 140 million yen, or around $1.08 million, for work already completed, because his bank account had been seized.

Its component supplies are up in the air and its staff have been left hanging, as funds have been depleted by payments to business partners. Shinwa had to lay off around 30 people. Shintaro Tsutsumi, the company’s 42-year-old president, has asked Trail and Rakuten himself for relief many times, but says he’s got no response.

This past December, Shinwa filed a lawsuit against Trail, demanding payment of the unpaid 140 million yen. Tsutsumi declared angrily, “Why do subcontractors have to pay for the illicit actions of a Rakuten employee?”

Imax, subcontracted by Nippon Logistech via Trail to manage and transport components, also fell victim to the Rakuten worker’s suspected embezzlement. The Sagamihara, Kanagawa Prefecture-based firm went bankrupt at the end of 2022, apparently costing some 500 employees across Japan their jobs. Many of them are still waiting for unpaid salaries and compensation for loss of earnings, and some have applied for relief with the Tokyo Metropolitan Government’s Labor Relations Commission.

A 51-year-old woman and former Imax contract worker from Chiba Prefecture has not yet received her salary of around 200,000 yen (about $1,500) for August 2022. Although she has been searching for a new job since September, when she was dismissed, she has not found one, and is seeking relief measures. She commented, “Rakuten also has responsibility, for allowing such careless transactions.”

Hideki Mizuno, a lawyer familiar with labor issues, said, “Terminating a contract with a business partner due to suspicions of illicit activity cannot be helped, but in terms of the moral responsibility of a major firm, Rakuten could at least take measures like directly commissioning subcontractors to do work so that they’re not forced into bankruptcy.”

In response to a Mainichi Shimbun inquiry, Rakuten commented, “We are not in a position to respond, or be involved with businesses which were entrusted with tasks by our business partners.”

(Japanese original by Nana Hayashida and Ryo Endo, Tokyo City News Department)


Leave a Reply

Your email address will not be published. Required fields are marked *