Accounting Fraud at KDDI: Negligence Allowed Huge Amount of Fake Business to Escape Detection

Editorial

16:04 JST, April 4, 2026

KDDI Corp., which provides telecommunications infrastructure, has been found to have failed to detect massive accounting fraud for years at its subsidiaries. Its failure in corporate governance is serious. The company must thoroughly implement measures to prevent a recurrence and urgently restore public trust.

KDDI has released an investigation report by a third-party committee regarding accounting irregularities related to online advertising businesses within the group.

There had been fictitious transactions since no later than 2018 mainly between Biglobe Inc., a KDDI subsidiary engaged in advertising agency services, and Biglobe’s subsidiary G-Plan Inc. Their sales were reportedly inflated by ¥246.1 billion. The presidents of both Biglobe and G-Plan have resigned to take responsibility.

The fraud involved a classic type of scheme called “circular transactions.”

In a normal transaction, an advertiser places an order with an advertising agency, which earns a commission by running the ad on an online media platform. The media platform receives the advertising fee from the advertiser.

The fraud in question was orchestrated by two G-Plan employees. It is nothing short of astonishing that only 0.3% of the sales involved real advertisers and online media platforms, while 99.7% was from fictitious, circular transactions.

The motive for the misconduct is also surprisingly simple. These employees reportedly resorted to fraud to cover losses incurred in the advertising business.

They circulated funds, including loans from KDDI, among 21 advertising agencies through fictitious transactions to inflate commission revenue.

In February last year, the then KDDI president grew suspicious of the sharp increase in sales and initiated a full-scale audit. As a result, the fraud was uncovered, but the audit came too late.

One of the employees had also received about ¥30 million from external advertising agencies over a period of more than two years to pay for meals and other expenses. Their lack of ethics is egregious.

KDDI, a parent company, has the grave responsibility of supervising its subsidiaries. The report cited a group-wide lack of expertise in online advertising and inadequate management systems at KDDI’s subsidiaries as among the causes of the fraud.

The report concluded that it was not a case of organizational fraud, but given the scale of the misconduct, it is inevitable for KDDI to lose public trust.

KDDI said it intends to file a criminal complaint against those involved in the misconduct. It is necessary for the company to work to uncover the full picture of this fraud case.

KDDI, which engages in mobile phone and other services, is a company with a high public profile, so it particularly must be credible. Its stable management is also crucial.

The telecommunications industry is struggling to achieve revenue growth from voice and other telecommunications services. KDDI must keep it in mind that strengthening group governance is essential to achieving growth through business diversification.

 (From The Yomiuri Shimbun, April 4, 2026)