Hidden funds: Consequences of a corrupt practice / Loopholes in Political Funds Law Lead to Fundraising Scandal

The Yomiuri Shimbun

16:11 JST, January 23, 2024

Every spring, a 64-year-old futon store owner in Hashima, Gifu Prefecture, has visited the local office of House of Councillors lawmaker Yasutada Ono, 64, who was recently indicted without arrest on suspicion of violating the Political Funds Control Law. Ono has since left the Liberal Democratic Party.

Each time, the man has put his seal on a political funds report from the funds management organization led by Ono that was prepared in advance for him. He has been urged by the office staff to take a look, but the man could not understand the contents. This despite the fact that he was nominally a treasurer of the organization.

“I’d just affix my seal without asking any questions, and the procedures at the office would only take 10 to 15 minutes,” the man said.

He has supported Ono since the latter was a member of the Gifu Prefectural Assembly. The man was asked by Ono’s office to serve as a treasurer about 10 years ago, but he has served in name only and was not involved in the management of income and expenses.

The law requires treasurers of political organizations to prepare and submit political funds reports. Violators face penalties of up to five years in prison or fines up to ¥1 million. Despite the importance of this role, serving as a treasurer does not require specific qualifications, like a knowledge of accounting.

Ono is accused of accepting kickbacks from the LDP’s Abe faction and failing to declare about ¥51 million on his financial reports. Ono and his secretary were both indicted without arrest.

However, the lawmaker denied the allegations at a press conference on Friday, saying, “The management of political funds and the drafting of financial reports was left to my office staff.”

In effect, a politician can only be convicted of making a false entry in reports if they are found to have conspired with their secretaries, which is hard to prove. Although the futon store owner was not charged in the case, he stressed: “There’s no way a secretary would make a false entry on their own. There should be a system where legislators are also held accountable for their actions.”

Tickets bought as donations

The law was enacted in 1948 as lawmaker-initiated legislation, under the philosophy of “making the handling of political funds transparent.” Lawmakers have revised it each time they faced public criticism over scandals involving politics and money.

Restrictions on donations from corporations and organizations have been promoted. Only political parties and their branches can accept such donations, and the donor’s name and other details must be disclosed if the amount exceeds ¥50,000 per year.

In contrast, political fundraising parties can be held by factions or the political organizations of individual politicians, and the threshold above which ticket buyers’ information must be disclosed was lowered to ¥200,000 per purchase.

This difference has been used not only by politicians but also by companies for their own gain.

The chairperson of a consulting firm in Tokyo refuses to donate to the Abe faction, or to Diet members in the faction with whom they have a relationship. Instead, this person purchases Abe faction party tickets every year in the name of the business.

A male executive at the company said: “Our chairperson dislikes being criticized as having cozy relationship with politicians. The company always keeps the amount under ¥200,000 so its name doesn’t appear in public.”

Since 2017, a company president in Gifu City has purchased ¥1.5 million worth of Abe faction party tickets every year under the name of the company he runs. He buys 75 tickets priced at ¥20,000 each every year, but the president and his employees have rarely attended the parties.

“I buy the tickets as a donation,” the company president said.

The law prohibits donations to political party factions from corporations and organizations, but the president said matter-of-factly, “I only buy tickets because I’m asked to do so.”

‘Fundamental improvements needed’

The latest scandal has exposed a system of channeling revenues from political fundraising parties into hidden funds. Various problems have been pointed out, including the fact that factions were not subject to audits. Also, the use of “funds for political activities” given by political parties to individual lawmakers did not have to be disclosed.

Tadashi Masuda, a professor of political science at Takasaki City University of Economics, stressed, “Unless the flow of political funds is changed so that it is completely visible from the outside, it will be possible for hidden funds to be created.”

Based on this understanding, “it is necessary to revise the law effectively, incorporating the opinions of not only politicians but also experts and others,” Masuda said. “It is vital to promote the digitization of political funds reports so they can be easily accessed by anyone, and to make drastic improvements to the system.”

Can political reforms in the Reiwa era really put a stop to scandals involving politics and money? Prime Minister Fumio Kishida heads the LDP’s political reform headquarters, and his commitment to this issue is being tested.