Yakuza: Japan’s armed venture capitalists

This is the second of a five-part series on the yakuza’s still wide reach in Japan. Part one is here.

Japan’s organized crime often works hand-in-glove with the pedigreed elite and other “yakuza-minded” businessmen and individuals, including lawyers and accountants. These kyoseisha – cooperative entities – are not yakuza themselves, but are willing to assist and are paid well for their services. In some cases, the connections are unwitting, but in most cases, they are knowing and intentional.

In 2009, Lehman Brothers Japan (LBJ) agreed to lend around US$350 million to a Japanese company to fund the refurbishment of hospitals and old-folks homes – a laudable and potentially profitable venture given Japan’s aging society. The borrower company and its representatives appeared legitimate and had several pedigreed advisors working with them.

LBJ even hired a well-known private investigative firm to vet the parties, and its own lawyers reviewed the deal. But, when the time came, repayment was not forthcoming. The money was never recovered.

This was a yakuza operation – reportedly done with “inside help” from at least one elite banker. All in all, not a bad day’s work: US$350 million – and tax-free. The deal itself and the main counterpart company in particular had all the earmarks of a yakuza scheme and should have been easily detected.