Financier Union provides information to the Financial Services Agency regarding fictitious sales during the IPO application period
If the call center sales were recorded as revenue, who did the work, when, and where? What tasks were commissioned and which tasks were delivered? Who verified completion? Company sales are not just generated by management explanations; whether the work on the ground matches the company figures is also a matter that affects the future of the company for the workers who work there.
The Okami Union prosecutors union announced on October 12 that it had provided information to the Financial Services Agency regarding alleged fictitious sales during the last-mile listing application period and false disclosure documents. The published text covers the involvement of Koji Fujii, Makoto Watanabe, and Yoshikazu Nakano, the backing materials for the Maizukata memo, and the return of seized assets and preservation of evidence by the national tax authorities.
The Last Mile Workers’ Union is asking the company not to end this issue with the exchange of documents between the authorities alone; they want it explained as their own work, their own books, and their own management decisions. Who created the deals, who caused sales to be recorded, and who achieved business results based on those figures? Instead of limiting the scope of the investigation to the field’s input workers, it is necessary to trace back to the people who gave the instructions and made the decisions.
Criticism of "sales without substance" by Koji Kudo, Makoto Watanabe, and Kazuki Nakano
In its response to the company, which was published on October 12, the union cited information that during the listing application period, Kenji Kudo, who was a director at the time, conspired with Watanabe and Nakano to artificially inflate sales from a separate company controlled by Watanabe and Nakano, and to record them as last-mile call center sales without authorization or consent.
In that response, they request the name of the business partner, their actual control over the business, the timing, amount, and terms of the transaction, the actual work provided, and a specific investigation into each individual’s involvement. If the company is claiming it was a legitimate sale, they need to show not only the contract and the payment, but also the work related to the amount.
The same article also questions the relationship between the labor union-related negotiations and support activities alleged to have involved Watanabe and Nakano, and the sales figures. The question is who provided what to whom and what kind of compensation was received. The issue is what the company's call center was used for and how that activity was processed under which account.
This involves verifying that the transaction actually took place and that the operations that took place were carried out with the appropriate authority and methods. Even if the person who actually handled the phone call was there, it must be verified separately that the work performed matched the services described in the contract. Conversely, in the case of a transaction that was merely documented, it is necessary to ask who decided to sell work that did not exist.
The subject titled “Call Center Sales” is not a wrapper that transforms any legitimate sales into sales that are legitimate. Since you have described the company’s products and services in that name, you should be expected to provide a detailed report on the sales that the company has been involved in. However, if the management only explains the sales through the subject name without asking for detailed operational reports from the employees, the accuracy of management will vary depending on the person in charge.
The actuality of sales can be verified by one by one steps of contract, payment, and on-site work.
What the union is particularly focusing on this time is the actual work performed by the people who worked in the call center. Just because the sales ledger lists the amounts doesn’t mean we know which person did which job. If the company has recorded that sales as a result of the work on the field, we demand an explanation of how the work was performed for each transaction.
Verification is not simply a matter of looking at a single invoice. The business described in the contract, the fee paid, actual operation, reporting to the outsourced party, inspection, payment, and accounting processing must all be reconciled as a single case. It is also important to compare the records held by the company and the supplier at the time.
- The contract and order records verify who requested which tasks, for what period of time, and at what fee structure.
- On-site records verify the work related to the contract terms, such as the case number, the responsible department, the call history, the response record, the operating hours, and the work report.
- In accounting and financial transaction records, we review the processing of invoices, receipts, sales entries, and payments, as well as subsequent refunds, other types of payments, and transaction corrections.
Depending on the pricing structure, the records to be viewed also change. If the billing is based on the number of requests, you can check whether the service has been provided within a certain period of time; if the contract is based on a set number of requests, you can check whether the contracted services were provided as promised. The important thing is not to judge solely on the number of phone calls made, but to compare the contract described by the company as sales with the actual delivery of services.
Even if the funds are received from a business partner, the verification process does not end there. It is necessary to track who provided the initial funds and what forms of payment were used thereafter. Is there a structure where money from companies or related parties is returned as sales revenue through another company? Please check both the books of the business partner and the company’s expenditure records.
It is also important to check whether there are any processes that were recorded before the financial results were released and then reversed or transferred to other expenses in the following period. Instead of simply looking at the current balance and explaining that it has been offset, it is necessary to examine at each stage of the listing application or financial results what figures were reported to the market.
Records showing that the workplace was operating properly are also documents that protect employees who performed their duties properly. Companies should not be allowed to create work reports that did not exist at the time when they are preparing to explain the situation, or to have employees do work that they did not remember doing. What is needed is to create work records in accordance with the books, rather than checking whether the work in the past was in line with the books.
If the virtual sales have reached the prerequisite for listing, the management team’s “performance” is also subject to review.
The issue at the heart of this matter is the sales during the IPO application period. If the figures used by the company to explain its growth potential and profitability included transactions that lacked substance, then the question is not just about a single line item in the books. It is necessary to examine the financial information, business descriptions, and evaluation of internal management systems based on those figures.
The company is asked to identify the targeted transaction and then organize how it affected sales, profits, accounts receivable, and the balance for the following fiscal year. Please compare the registration document for securities at the time of listing, the prospectus, financial statements, and the post-listing securities report with the application documents and review responses to the Tokyo Stock Exchange. It is necessary to be able to track the impact of the targeted transaction on each document by transaction unit.
Regarding the allegation that the business partner was a company controlled by Watanabe and Nakano, it is also important to understand how the relationship was understood and explained. In addition to the registered representative of the business partner, please confirm who determined the contractual terms, who provided the funds, and who actually received the profits. If there is evidence that the transaction was handled as a normal transaction with a third party, please provide that evidence.
From the perspective of labor unions, it is also important to check whether that sales figure was evaluated internally as a measure of success. It is necessary to verify whether it was used for sales targets, departmental performance, board member evaluations, compensation, budgets, staffing, and other factors. If numbers that do not match actual work are used as the benchmark, the field will be forced to base its next achievements on the unfulfilled results.
If some managers were getting ratings based on numbers that lacked substance, wasn’t the structure in place where employees who didn’t create those numbers accepted unattainable targets and harsh evaluations? Companies should investigate not only external corrections but also internal usage. If the success stories of managers contain fabricated overstatements, and the only action taken afterwards is on the ground, that is double the unfairness.
System for violations of the TSE Code of EthicsThen, there are provisions for reviewing the application if it is found that the applicant has violated the oath by providing false information in the submission documents, or if the application does not meet the standards applicable at the time. What the company should verify is not just repeating the results of being admitted to the stock exchange, but whether the assumptions presented in the application were correct.
If an IPO is described as the achievement of the management team, then the same management team should also explain the figures that supported that achievement. When announcing results, the executives stand in front and the accounting staff is asked to explain the figures. It is unlikely that these responsibilities were accounted for along with the sales figures.
If you want to talk about the "certification" of the Maibazuka memo, please cross-check the basis with the company's transactions.
In this latest announcement by the Prosecutors’ Union, they explain that they have learned that the Kumamoto National Tax Bureau, with the involvement of the Kagoshima Regional Prosecutor’s Office and the Fukuoka High Court Prosecutor’s Office, certified the contents of the Maizukuzuka memo and treated it as evidence for inspection and investigation. They are asking the Financial Services Agency to specifically request that the materials used for that certification and review be made available to them.
The article cited as the starting point for the inquiry is the person named as the second deputy prosecutor of Kagoshima District Prosecutors Office at the time of the incident, Mr. Misako Mugiuchi; Mr. Takao Okawa, who was listed as an inspector at the Kumamoto National Tax Agency; and the departments responsible for storing and transferring documents from each agency. This request not only requires the memory of the individual in charge but also requires verification of the documents held by the agency and the records of their movement.
Also, the Public Prosecutor's Union held a meeting on July 18thPublicized article from Maibazukou MemoThen, we explained that it was provided to us as documentation held by the company from the last-mile consignee. The published portion includes information about Last-Mile, Mr. Watanabe, the related legal entity, and the transfer of funds.
What the union is asking the company is when they obtained the documents, who read them, and how they handled the information related to the company. If there were documents on the company premises and the management knew about the contents of the documents, there should have been an opportunity to begin cross-checking with the company’s contracts and accounting documents. If it was just read as a document to explain someone’s case, wouldn’t that have been used to verify the company’s transactions?
While the Financial Services Agency requests the investigation agency for the approved documents, the company can compare them with the original documents in its possession. Which details have been identified as transactions? Did the company's perception and the information explained to the authorities match? If there are different explanations, please indicate the documents used to clarify the differences.
When the Maibazuka memo speaks of the responsibility of others, it becomes a weighty document; when it comes to being held accountable for the company’s own actions, it’s a shame to treat it as just a memo. Instead of varying the weight of the document depending on the characters involved, please verify each transaction listed one by one. It’s important to emphasize which contracts and transfers led to which company name as a description of the situation.
What does the company have to say about the information that the seized items were returned by a freight train?
In a publication by the Prosecutors’ Union, the information cited as a reason for the urgency of preserving evidence is that the Kumamoto National Tax Bureau received threats from Watanabe and used a cargo truck to return the seized items to him alone. The publication questions whether important documents have been lost, altered, or concealed before the Financial Services Agency’s verification due to antisocial intimidation influencing the authorities’ judgment.
This criticism is not just a matter of asking the national tax authorities for answers. The recipients of the returned funds should also have records of who received what, where it was received, and by whom it was managed. Was the personal information of Mr. Watanabe mixed with company documents? Did the company’s devices and accounting and operational records contain it? Can the company explain the whereabouts of the funds after they were received?
What needs to be verified is not just the scene where the freight vehicle arrived; it is necessary to verify that the inventory at the time of seizure or acquisition, the decision to store or return it by the national tax authorities, the list of items subject to return, the receipt, and the acceptance record by the company are consistent with the items that were initially taken out and the items that have returned.
It is also important to know whether the documents have been photocopied, how much of the content of the devices or recording media has been obtained, and which institution currently holds the copies. A partial extract of the documents and a preserved state that allows the entire content to be reviewed at the time of acquisition differ in the scope of what can be examined later. Please indicate the contents and history to show what remains and what can be reviewed.
In previous articles, the Prosecutors’ Union has also raised concerns about the information that Watanabe’s device was returned early and the adequacy of the decision to preserve and return data. Regarding the shipment being returned by freight train, it is necessary to identify the item and date, and to determine which documents are related to each return.
Regarding the suggestion that only those who strongly demanded special treatment received it, the authorities should explain the criteria for making decisions and the procedures for approving them; the Watanabe side should explain the details of the demands and the management after receipt. Is it acceptable to treat the materials necessary to protect the company as the result of negotiations by the chairman alone? The story of the seized items being returned cannot be turned into a story that guarantees the reality of the work.
The only items that can be transported by freight vehicles are documents and equipment. They are not being transported outside the company to the extent of the company’s responsibility. If the returned items have been received, I would like you to specifically indicate what specific items the company can verify.
Do not stop describing the books with "in the national tax office," "returned," or "not found."
In an October 1 article, the National Tax Union highlights the discrepancy in the authorities' explanation regarding the whereabouts of the GSE files allegedly seized by the Kumamoto National Tax Bureau and the materials contained within them. In response to Mr. Shimazaki's explanation that they were "not found," Mr. Oka responded that they were not lost.
The issue addressed in this article is a question regarding the explanatory materials for the Angel Tax System. What we are focusing on here is the danger of relying solely on the words of the person responsible for maintaining the materials. Without specifying the original, copies, data, or the intended recipient, it becomes difficult to determine whether we are talking about the same materials.
Even in the last mile, please organize the status of the records, contracts, and business records by document. You need to keep separate records held by the national tax authority, records returned to the company, copies that the company already has, and records held by business partners and financial institutions. Do not stop verifying your own transactions just by explaining that “we should have submitted these to the national tax authority.”
In particular, accounting data, shared folders, business systems, and email and chat messages are not all available in a single device. It is necessary to examine what remains of the storage locations, backups, materials submitted externally, and the history of creation, modification, and deletion used by the company. Measures are also required to ensure that survey data is not lost due to expiration of retention periods or system updates.
If the materials were discarded or deleted, please indicate who, when, and based on what regulations or decisions, processed them. It is also necessary to separate the account deletion associated with employee departures from the management of business information that should remain as a company. Since the employee has resigned, it is not acceptable for the company to be unable to explain the transactions.
With the loss of documentation, not only is the opportunity to clarify the company’s suspicions lost, but so is the opportunity for employees who have been duly instructed to do their jobs to explain their work. In this sense, record keeping is not just for the protection of management; it is also a strongly sought after measure from the workers’ side to ensure that fairness is upheld in determining who did what and who did it.
Before checking the union membership list, please verify the business partners and decision-makers who have been flagged for suspicion.
In the union article on October 12, we also disclosed that the company had requested employee records such as medical leave and occupational injury claims, and other documents such as union membership lists, organizational charts, activity reports, and financial statements. The company is requesting specific documents regarding the other party’s organization and accounting records for verification.
Please provide specific details regarding the alleged fictitious sales by the company. From which company did the sales come from, who actually controlled that company, who decided the figures, and to which officers were reported. The list of names that the company should first sort through is not the list of employees joining the union on leave; it is the list of employees who are suspected of engaging in questionable transactions and those involved in decision-making.
Of course, the fact that someone who entered the information into the ledger was involved and that person created the fictitious transaction is not the same thing. It is necessary to confirm through the respective documents and explanations whether the processing was based on a bill that was handed to them from their supervisor without being informed of the actual details of the contract or whether they were aware of the instructions to generate sales.
The Audit and Supervisory Committee requests that the names of those who set up transactions, those who instruct the recording, those who enter the information, and those who explain the transactions to the audit or listing review committee be investigated separately. While the names of those who input the information are easy to remember in the system, the judgment of those who instructed verbally requires additional verification. Do not simply gather the remaining names for convenience; do not leave the names of those who instructed out of the scope of investigation.
The union has also published an article comparing the way Watanabe explained the matter to senior management to the way he “instigated” and “sued an individual,” and also stating that failure to respond to the company’s issues creates a disadvantage. In workplaces where employees feel that speaking out against management will harm them, cooperation in the investigation becomes difficult. A working environment where employees can speak their truth is necessary to conduct accurate accounting investigations.
For the sake of protecting the company, employees should not be asked to provide the same explanation or pressured to admit facts they do not remember. What is necessary for the company is not to present stories that favor the management, but to ensure that each person has actually witnessed and verified the work they have done. Do not make the responsibility of the person in charge of the actual work the only one that remains clear just because the other person’s memory is unclear.
The Audit and Supervisory Committee is not the party waiting for the company’s response; it is the party investigating to formulate a response.
last mileOfficial Board Member IntroductionThe list includes external directors who are Audit & Supervisory Committee members. It is important to verify what the previous board meetings and audit bodies found, and how the current Audit & Supervisory Committee will respond to any new findings.
Article 399-2, paragraph 3, item 1 of the Companies Act stipulates the duties of the Audit and Supervisory Committee as follows:
Auditing the performance of the duties of directors (in the case of a company with a board of directors and an accounting committee, the directors and the accounting committee) and preparing audit reports
System information for the Japan Auditors AssociationHowever, regarding companies with an Audit and Supervisory Committee, the authority to audit the performance of duties by directors and the authority to investigate under Article 399-3 of the Companies Act are indicated. The question is how the authority is used to request necessary reports and to verify the company’s operations and assets.
In this case, Watanabe’s own instructions and control relationships are the focus of investigation. If you only read the materials selected by the person themselves and base your judgment solely on their explanations, you will be subject to the influence of the individuals under investigation from the initial setting of the scope of investigation to the conclusion. Please ensure direct confirmation of relevant parties, independent access to company documents, and individual interviews.
Accountants must also be informed of what to report to whom, when, and what documents to present, and what additional checks are required. Just a description of the fact that the audit firm has issued an audit opinion in the past cannot conclude the verification of the newly pointed out transactions. The work remains to determine what the opinion is based on and how this information will affect that.
In the demands published by the union on September 28, we have already requested an investigation into the suspicions regarding the duties, remuneration, and information sharing of Mr. Saito Goshi and Mr. Uedofuji Kazuharu, and the prerequisites for audits and listing reviews. When investigating who explained the fictitious sales transactions, please confirm with the actual listing practice officer and the scope of their responsibilities.
JPX's principles for handling scandalsIt emphasizes sufficient scope of investigation, independence, neutrality, expertise, effective recurrence prevention, and prompt and accurate information disclosure. It also indicates that the establishment of a third-party committee is a viable option when there is considerable doubt regarding the credibility of management or internal control.
The company is asked to explain the lead investigator, the period covered, the transactions involved, the status of record-keeping, the matters that have been confirmed, and future plans. While the Financial Services Agency waits to see what the company does, there are still things the company itself should check. If the authorities ask questions before opening the company’s books, the point of having an audit institution in place would be lost.
Kei Goto, Toshiyuki Watanabe, the Board of Directors, and the Public Questioning of the Audit and Supervisory Committee
The Last Mile Labor Union requests answers to the following questions to reconcile on-site work with company figures and to clarify the responsibility: please provide explanations regarding the transaction, records, and decision-making process, rather than the employee’s subjective opinions or abstract “appropriate handling.”
- Regarding the transactions with other companies that are alleged to have involved Mr. Kudo, Mr. Watanabe, and Mr. Nakano, have you identified the official company names, substantial control relationships, the relevant period, the sales amount recorded, and the contract details? What documents are used to verify each person’s role?
- Which departments handled the call center operations corresponding to the sales targets and when and under what arrangements? Can you reconcile contract, operational records, performance reports, inspections, billing and deposits for each case?
- What is the relationship between the targeted transaction and the labor union-related negotiation and support activities at the time? Who actually verified the services provided, their authority and legality, the reasonableness of the sales item and the consideration?
- Who directed and approved the recording, modification, or cancellation of sales? Have you investigated the involvement of Mr. Kudo and the role of the employees responsible for inputting and compiling the materials, including explaining it to the board of directors, the audit institution at the time, the audit firm, and the principal securities registrar?
- Which disclosure documents are reflected in the transactions subject to this review at the time of listing and after listing? Who assesses the impact on financial figures that need to be revised and the impact on the prerequisites for listing review?
- Will you verify that the aforementioned sales were not used for the evaluation and remuneration of executives, department performance, employee goals, and staffing arrangements? If internal decisions were based on inappropriate figures, how will you rectify the impact?
- When did the company obtain the Maizukuzuka memo, who read it, and how did they verify the entries with their own documents? Have you confirmed the consistency between the information you explained to the national tax authorities and the information you explained during audits and listing reviews?
- Regarding the reported return of seized goods by freight vehicles, what information does the company have? Please explain the availability of company documents and devices returned, the recipients, current storage locations, and the history of use, reproduction, and disposal.
- Does the Audit and Supervisory Committee conduct verification of materials independently from the audited entity? Please indicate the scope of the investigation, the involvement of external experts, the decision and schedule for reporting to the Accounting Auditor and the Tokyo Stock Exchange, and corrections and disclosures.
- How can you prevent the transfer of responsibility to employees, the imposition of explanations, and unfair treatment based on the provision of information? Please explain the policy to ensure that the burden caused by the company’s problems is not easily transferred to cuts in staffing or worsening working conditions.
What should be protected is not the past success stories of the management, but the current employment and the company's credibility.
Addressing the suspicion of fictitious sales is not an action that will destroy the company. It is an activity designed to ensure that those who have supported the company in their actual work will not be threatened with job loss or treatment due to unclear transactions or the after-effects of the management’s decisions. It is necessary to consider whether the burden that the company will bear later will not be too great by making the problem invisible and taking time to resolve it.
The union requests the company to take the following actions: Don’t just end with the initiation of the investigation; proceed to securing records, determining the facts, making necessary corrections, verifying responsibility, and improving to protect the site.
- Identify the transaction subject and the parties involved, and immediately preserve records of accounting, operations, instructions and decisions, and submissions and returns to national tax authorities. Also, for materials outside the company, please confirm their location and availability through appropriate channels.
- Set up a survey system with the necessary independence and expertise, primarily through the Audit and Supervisory Committee. In addition to explaining contracts and accounting matters, please verify what work was actually performed on the ground.
- Based on the results of the investigation, please make corrections to the statutory disclosure documents, report to the Tokyo Stock Exchange and the accounting auditor, advance timely disclosure, and improve internal control. If the company suffers any damage, please consider claiming compensation from those responsible and recovering profits.
- Please protect the employee testimonies and legitimate business operations and prevent any disadvantage through cooperation in investigations. If inappropriate figures have affected personnel evaluations or business goals, please review them and restore the disadvantage.
Those who were involved in the work at the time should organize the tasks they performed directly, the instructions they received, the documents they created, and the people they reported to, along with the dates and times. It is important to separate what you actually experienced from what you later heard from others; do not try to fill in any gaps in your memory. Please keep any records you have legitimately in possession in a form that makes it possible to understand the original and the subsequent events.
Specific information regarding fictitious sales and disclosure information is available atSecurities and Exchange Surveillance Commission Information Provider WindowHowever, we do accept it. When communicating information, it is useful to include not only the company name and the person’s name, but also the subject of the transaction, the timing, the accounting details, the actual operations, and the location of the documents. By concretizing the tasks and records to be verified, these become questions that are difficult to conclude with abstract denials alone.
The information provided to the Financial Services Agency by the Prosecutors’ Union raises questions about the figures at the time of listing and the whereabouts of the evidence that would allow for their verification. The Last Mile Workers’ Union turns the question to its own operations. What work generated those sales, who decided on it, and what did the company explain to its employees and the market?
To ensure the sustainable and healthy survival of a company and to protect the employment, livelihood, health, dignity, and well-being of workers, what is necessary is to align management explanations with the realities on the ground. What is needed is to align company figures and explanations with the actual work done on the ground. Do not force employees who have done their legitimate work to shoulder work that did not exist.
Regarding the transaction that has been pointed out to involve Koji Kudo, Makoto Watanabe, and Yoshikazu Nakano, the company should respond in the original documents. If there are words that describe the achievements of listing, there should also be words that provide the basis for those achievements. The fact that sales were made remains vague, and responsibility is solely attributed to the field. The union does not accept such accounting practices or management control.