Padded Prices

Mitsui pleads guilty to fraud

Trade frictions between the U.S. and Japan worsened last week when still another Japanese company became ensnared in an American criminal prosecution. In San Francisco the U.S. subsidiary of Mitsui & Co., Ltd. (1981 sales: an estimated $45 billion), one of Japan's largest trading companies, pleaded guilty to a 21-count customs fraud indictment in connection with steel exports to the U.S., and agreed to pay $11.2 million in civil and criminal fines. The penalties against the company, which handles about 40% of Japanese steel sales in America, were the heaviest in the 193-year history of the U.S. Customs Service.

The Mitsui action was the third one filed against Japanese firms in the past month. On June 30 the FBI charged Hitachi Ltd., Japan's fourth largest computer maker, and 14 of its employees with conspiring to steal IBM secrets. Last week a federal grand jury in San Francisco handed down similar indictments stemming from the case against Mitsubishi Electric Corp. and four of its employees.

U.S. Attorney Joseph Russoniello denied that the string of prosecutions represents a crackdown specifically against Japanese companies. Russoniello acknowledged, however, that he expects the cases to act as warnings to foreign firms everywhere. Said he: "It's fairly safe to say that a signal is being sent out by the Administration to all persons who do business with the United States that there are rules, and that failure to comply with the rules and to obey American laws may result in prosecution."

In the latest case, the federal grand jury accused Mitsui & Co. (U.S.A.), Inc., and three of its employees of deliberately overstating steel prices. Some American firms paid Mitsui the higher amounts, but then received refunds on part of the sales price. The figures were exaggerated to avoid triggering a U.S. investigation into possible steel dumping.

Mitsui employees themselves set off the criminal probe in March 1980, when they brought some suspicious looking documents to customs agents in San Francisco. Investigators searched company offices in New York City and San Francisco in December 1980, and ultimately combed through stacks of records and import statements dating from 1977 to last June. The hunt turned up evidence that Mitsui had conspired with two Northern California steel buyers to overstate the price of wire products and nails. Both U.S. firms last year pleaded guilty to criminal charges brought in separate cases.

Mitsui blamed the overstatements on bookkeeping errors and promised that such "procedural mistakes" would not be repeated. Said Junichi Amano, general manager of the San Francisco office: "Mitsui U.S.A. has taken steps to ensure that there will be no deviations by any employee from Mitsui U.S.A.'s strict policy of full compliance with the laws of the United States."

The incidents of illegal Japanese business practices are having a strong impact in Tokyo. Said Kinji Yajima, professor emeritus of the prestigious Tokyo Institute of Technology: "Our mercantile image has once again been tarnished. We Japanese are now being regarded as a scheming bunch of villains around the U.S. It will take years for us to improve our image to what it had been before Hitachi, Mitsubishi and Mitsui were caught." The land where saving face is all important is now worried about losing face.

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