Thursday, July 02, 2009

Yukio Hatoyama’s Political Financing Troubles

Reporter: Exactly what kind of correction was made with regard to the political financing report? Since Mr. Hatoyama is already donating 9 million yen annually, if he surpasses 10 million yen [as he obviously will with the additional 21.77 million yen over the last 4 years], he’s over the quantitative limit for personal donations, isn’t he?
Yoichi Ioroi, Esq.: I [as the lawyer employed to conduct a third-party investigation of the matter] will answer that question. With regard to the issue of quantitative limitations, we think that the money should be correctly treated as loans. We made the necessary corrections [in a supplementary report].

30 June press conference by Yukio Hatoyama and the lead lawyer for his investigation
The Hatoyama camp had been using his personal funds in recent years to cover shortfalls in his political financing organization. It came to light when it was revealed that the money had been reported as donations from individuals in the names of Hatoyama friends and acquaintances—without their permission. (Sometimes, the Hatoyama camp had no choice; in a life-imitates-satire version of Gogol’s Dead Souls, some of them were already dead.) As the above excerpt from Hatoyama’s press conference shows, the aide resorted to the ruse because the money would have put Hatoyama over the annual 10 million yen limit for donations by an individual to political organizations other than a political party*. Hatoyama denied any knowledge of the cover-up and blamed it on a top aide, who allegedly had been diverting funds entrusted to him to cover expenditures that should properly be attributed to Hatoyama personally and putting the money into Hatoyama’s political financed management organization. In the press conference, Hatoyama offered the conjecture that the aide may have resorted to such extraordinary measures because the latter had been too embarrassed to admit that he had not been able to secure enough individual donations in recent years. Hatoyama accepted responsibility and promised to clean up his operation. With this, Hatoyama wishes to move on; I suspect the legal problems have only begun.

Post facto corrections to the annual reports that political financing organizations file with the authorities are fairly commonplace. But can the underlying facts themselves be corrected, i.e. transform what could very well have been straightforward donations into loans? After all, the lawyer responsible for the investigation admitted in the press conference that the aide had no idea of using “loans” as a legal (and therefore infinitely better) means to circumvent the 10 million yen ceiling. In other words, it is at least plausible that the aide, being at both ends of the transactions as Hatoyama’s agent (by way of power-of-attorney over a Hatoyama bank account) and an employee of Hatoyama’s political finance organization, had intended to irrecoverably transfer said funds from the former to the latter.

If that is indeed the case, the aide maybe charged with two separate infractions as an employee of a political finance organization: A) making a false entry in a report , which is punishable under Article 25, paragraph 1, item (iii) by imprisonment of not more than 5 years and/or fine of not more than 1 million yen; and B) receiving a donation in violation of the 10 million yen ceiling, which is punishable under Article 26, item (i), by imprisonment of not more than 1 year and/or fine of not more than 500,000 yen. The excess donation is subject to forfeiture under Article 28-2. Theoretically, Hatoyama himself could be held charged with two separate infractions: C) as head of the political finance organization, negligence in appointing and supervising the CFO, which is punishable by a fine of not more than 500,000 yen (Article 25, paragraph 1); and D) making a donation in violation of the 10 million yen ceiling, which is punishable by imprisonment of not more than 1 year and/or fine of not more than 500,000 yen (Article 26, item (i)).

It’s hard to believe that the aide will not go down for A). Recasting the donation as a loan appears designed to avoid B), but that’s difficult to do when it is revealed Hatoyama’s agent—the aide—had nothing of the sort in mind at the time. Thus, I think that the lawyer’s admission during the press conference was a tactical error from a legal viewpoint, though understandable from a political perspective. If the aide goes down for B), forfeiture ensues. I have no particular views about C), though at least one former public prosecutor has repeatedly stated in public that this particular negligence clause is near-impossible to invoke and I have no reason to doubt that. I am even more doubtful about the possibilities of the Public Prosecutors Office charging Hatoyama with D), since the aide’s story and Hatoyama’s denial of any knowledge ring true to me**. In any case, you can be sure that the PPO is is the last of all institutions to overlook these possibilities.

In conclusion, as far as indictments are concerned, the yen will stop at the aide. However, recasting the donation as loans is likely to put the Hatoyama camp at odds with the PPO, with the case dragging out publicly over the coming months, possibly years, in a legal dispute over B)—instead of a quick guilty plea by the aide and a suspended sentence, plus forfeiture of the excess money. In the process, further attention will be drawn to Hatoyama’s “personal” fund—a substantial sum by his own admission—and its real purpose, seeing as it has been controlled by the same aide.

* Actually, it’s a little more complicated than that, but this is close enough for our purposes here.
** Article 21-3, paragraph 3, bans personal donations over 10 million yen while Article 26, item (i) defines its criminality. They do not appear to have taken a case like this, where an agent makes the offending donations without the principal’s knowledge. There’s a chance that the PPO may try to push the envelope on this one and charge the aide at both ends of the donations.

No comments: