[Last One Mile Labor Union] Makoto Watanabe's "lawsuit declaration" leaked from executives

Before talking about the delisting of other companies, are your company's disclosure preparations ready?

Once again, an internal whistleblower has come forward from a senior executive at Last Mile. According to reports, Representative Director and CEO of Last Mile, Mr. Tsuchiya Makoto, declared to senior executives that he was instigating legal action against a specific individual, and even went on to explain in detail the purpose and implications of the action.

There seems to be quite a lot of internal discussion about plans to push other companies into delisting. So, how much information does the company’s board of directors and audit committee have about the involvement of the last-mile executives, the executives responsible for listing operations, and Watanabe himself in these discussions? Shouldn’t the preparation for pursuing the other company and the preparation for explaining the situation be carried out in the same meeting room?

The filing of the lawsuit was discussed with the executives, and specific explanations were given regarding Mr. Saito Goshi.

According to information received from senior management, Watanabe reportedly discussed the idea of obtaining the indictment for the tax evasion and fraud case involving defendant Koji Nakano, using it to pressure specific companies into disclosing information, and pushing for the delisting of the company. According to this information, he also reportedly explained the specific details of the situation regarding a specific last-mile executive, raising concerns about their lack of suitability as officers and the falsity of the documents, and communicated this to the senior management.

Among those mentioned in the explanation was Saito Goshi, a certified public accountant who is in charge of the day-to-day operations of Last One Mile and who, along with Nakano and Watanabe, has spearheaded the solicitation and explanation of investments using the Angel Tax system. According to information from the executives, Watanabe had specifically mentioned the following about Saito:

• The former executive who recommended the investment received the start-up capital, but in reality did not carry out the work he had promised.
• Therefore, they were held accountable and returned the start-up funds they received.
• It is related to the investigation and prosecution by the Tokyo National Tax Bureau, the Yokohama District Public Prosecutors Office, the Kumamoto National Tax Bureau, and the Kagoshima District Public Prosecutors Office, and has a history of being subjected to seizure and repeated questioning.
• An assessment that this is an incident with objective corroboration regarding these matters.

What I am telling here is the explanation that Mr. Watanabe went to the executives. Therefore, I would like Mr. Watanabe to provide the same concrete evidence of the basis for that explanation and of when he learned what he did know, and to explain the details of Saito’s case in a similar manner. If he has a thorough understanding of the situation, he should have enough material to report to the company’s audit department.

The union has previously taken up internal reports that Watanabe had told executives about schemes to target other companies or specific individuals. What is needed now is not just a more significant warning, but an explanation of the procedures actually followed and the company’s decision-making process.

If you want to talk about the delisting of U.S. companies, please also provide the applicable regulations and the chronological order in which they were implemented.

According to the information received, the transactions and actions that Watanabe is concerned about involve events that took place before the target companies went public on the US market. In that case, it is necessary to organize the timing of the actions, the time the company became aware of them, the explanation given at the time of the application for listing, and the subsequent procedures, as well as the impact on the current company.

Even if you bring the impression of Japan’s timely disclosure into the discussion of the U.S. securities disclosure system, it will not lead to a conclusion. For example, this applies to the listing application of foreign companies.SEC Form F-1It isForm 20-FSee the disclosure items of Form 20-F. Item 8.A.7 also covers lawsuits that could have a significant impact on the company's financial condition or profitability.

The question is which rules apply to the target company, which facts are important, what documents contain what, and what is missing. Whether it happened before the IPO is part of the timeline needed for the investigation. Just stating that there is a “complaint” is not enough to do the work.

If you point out that the other party’s documents are false, please provide the name of the document, the relevant section, the difference from the facts, and the criteria applicable. If you point out the directors’ misconduct, I would appreciate it if you could indicate which actions of whom and when they conflict with which qualification requirements. If you simply conclude on a global level and forget to include the evidence in your oral explanation at home, that would be unacceptable even for a listed company’s business plan.

The explanation that questions Saito is going to return to Watanabe's own involvement.

Based on information from the executives, this story is not a scenario in which Watanabe accidentally learned about the past of someone unrelated to the last mile. Saito has been involved in the company’s IPO practices and, in building relationships with people such as Nakano and former executives, the union understands that Watanabe’s own introduction and involvement played a role.

Furthermore, it is also reported that Watanabe himself underwent an investigation by the national tax authorities and engaged in what is known as a so-called “backroom deal” with Nakano and Saito. What did they discuss and what did they ask each other? Was it a consultation to verify the facts? Or was it a coordination to come up with explanations that differed from the facts? The specific details of that will be the subject of investigation.

The issues that the association has identified overlap with the trading during the last-mile listing application period and the involvement of relevant parties. It is necessary to separate the time when the transaction took place from the time when the investigation was conducted, and then compare it with the responses to the listing review at the time, as well as the subsequent company briefings.

If you are explaining to executives that there is “objective evidence” regarding Saito, that material should not be read only to find the parts that suit your own lawsuit. The same standards should be applied to the final mile of listing practice, Watanabe’s instructions, and the roles of the relevant parties. The structure of introducing the characters themselves while moving to the third-party commentary section only when a problem arises requires explanation.

Japan's disclosure standards apply to last-mile delivery services themselves as well.

As a listed company in Japan, Last One Mile is in a position to consider important facts about its own company. Rule 402, Item 2 of the TSE Listing Regulations requires disclosure of the following types of important facts regarding the company’s operations, business, and assets:

"Something that has a significant impact on investors' investment decisions"

Official explanation from the Tokyo Stock ExchangeWe are asking for a substantive assessment based on the facts and their implications. In other words, what the company should be concerned about is not just whether someone has been arrested, but also what impact this will have on the company's operations, assets, governance, and existing explanations.

If what Watanabe says to executives includes actions by his own company’s listed operations officer and former executives, tax investigation by the country’s tax authorities, the falsity of documents, and the officer’s lack of suitability, please explain how the company investigated these matters and what it communicated to the Audit and Supervisory Committee and the accounting auditor. Any consultation with the Tokyo Stock Exchange and the decision on whether to disclose information are also included in that explanation.

If you want other companies to disclose information, and you want to categorize it as an individual matter for your own company, then you should simply present the differences based on facts and standards. If you have already completed the review, you should simply present the scope of the review and the conclusions. There is no reason why the detailed explanations requested by other companies and the detailed explanations provided by your own company should be at odds with each other.

If you assume criminal reporting by former executives, are your company's preparations also ready?

As the narrative unfolds, let’s say if the arrest and prosecution of former executives are reported. In that case, if the report includes descriptions such as “former executives of the last mile” and “people involved in listed company practices,” what will the company verify and who will explain? If Watanabe assumes such a serious development, it is only natural that he will also consider the impact on his own company.

What the union is asking for is not the expectation of someone’s arrest, but the preparation of the company to face such a scenario. The things a company should have in place can be listed in detail.

• A system to identify the period of employment, duties, authority, and target transactions of the individuals involved, and to organize the company's involvement and the individual's actions.
• An alternative system for handling business and decision-making in cases where a person involved in the investigation or litigation response takes up time.
• Maintain past listing review materials, accounting records, contracts, and business-related communications, and establish a system for verifying them from an independent perspective.
• A system in place to respond to inquiries from employees, business partners, and shareholders and promptly determine whether or not disclosure is required.

Simply preparing to explain how your own initiative worked is not enough. If the person involved in that initiative appears, the number of questions about the company also increases. If there is a “plan to pressure the other side,” but there is no “response sheet for when the company is asked questions,” crisis management becomes completely at the other party’s discretion.

Mr. Watanabe Satoru’s public questions to the Board of Directors and the Audit and Supervisory Committee

The Last One Mile Union would like to ask the following questions regarding the information received from the executives: Please indicate that this is not a result of personal attacks, but rather a fact that can be confirmed by the company.

1. Regarding the lawsuit that Mr. Watanabe explained to the executives, could you please explain whether there is any actual lawsuit being filed, whether the plaintiff is an individual or a corporation, the details of the claim, and the company’s involvement. If the company is bearing costs or personnel, what is the purpose and approval process?
2. Regarding the receipt of the start-up capital from Shuji Saito, the failure to perform duties, the return, seizure, and the course of questioning, what did Watanabe explain based on what information? Did he report that information to the Audit and Supervisory Committee and the Accounting Auditor, and did he request a fact-finding investigation?
3. Regarding the information that Mr. Watanabe himself coordinated explanations with Mr. Nakano and Mr. Saito during the national tax investigation, has the company verified the actual correspondence, the responses to the authorities, and the consistency of the original documents?
4. Have you matched the actions of former executives with their duties, transactions, and review responses during the last-mile listing application period? Are the current management team’s own instructions, approvals, introductions, and the existence of any benefits also subject to the same investigation?
5. When addressing the disclosure obligations and officer qualifications of the target company in the United States, how were these determined based on which rules, points in time, submission documents, and fact determinations? Is the person who made that assessment in a position to verify it independently of the parties to the lawsuit?
6. Regarding the impact on the company from this matter, what did the board of directors, audit committee, and information management officer consider when and what? Is there a plan in place for explaining when criminal reports arise, business continuity, employee protection, consultation with the Tokyo Stock Exchange, and decision-making regarding disclosure?

If you want to use the company's resources, please coordinate with the company as a whole to handle the supervision.

Japan Exchange RegulationPrinciples for Responding to Corporate Scandals at Listed CompaniesWe prioritize examining the root cause of the issue, ensuring the independence and neutrality of the investigation, and providing the necessary information promptly and accurately. A company-wide approach means not just applauding the words of the management team, but also assigning each individual to conduct investigations, oversee them, and provide explanations.

The union requests the following action regarding the information that the company’s funds and personnel are being invested in this matter.

1. Organize the objectives of the lawsuit, the interests of the company, the budget, the delegation agreement, and the personnel allocation, and conduct independent oversight of the areas where the interests of Mr. Watanabe and the company overlap.
2. Not only Saito, Nakano, and former executives, but also Watanabe and the current management team’s involvement should be included in the scope of investigation, ensuring the consistency of the listing review materials and the subsequent company briefings.
3. Prevent any adverse treatment of research participants, and please explain to shareholders and employees as necessary about the company’s research results and disclosure decisions.

Anyone who knows the details of the investment presentation at the time, the work entrusted, the refund process, and the instructions received from the company should keep the records they hold legally intact, with the date and the details before and after. A record showing what was requested, who carried it out, and where it was reported to will reveal the true state of the company better than someone’s confident explanation.

If you are going to use the company's resources to pursue a lawsuit, please do your best to complete the management end as well. The budget is the company's responsibility, the work is the senior management's responsibility, the results are Watanabe's personal responsibility, and the accountability only rests with the person in charge.

Please channel the energy of your pursuit towards other companies into research and disclosure within your own organization. In that sense, I would like to make the same point regarding our association. Let us work together as a team and do our best. Please do not place the audit committee in the audience seat, please remember that.