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Bribery scandal shines light on shadier side of Japanese business

In its heyday just a few months ago, the Sagawa Kyubin group, a parcel delivery service, appeared to be the sort of enterprise whose go-go growth epitomized Japan's economic dynamism.

Men were walking into Sagawa Kyubin offices and taking jobs as truck drivers for spectacular wages, typically starting at $95,000 a year, and working exhausting days of 14 hours or more. Sagawa Kyubin's trucks, emblazoned with the logo of a hikyaku, the fleet-footed letter carriers of ancient Japan, were everywhere.

From its start in 1957 with just two vehicles, the group had grown to become the second-largest in its industry, with 25,000 employees and sales exceeding $7-billion.

Now the group's Tokyo affiliate lies at the center of a scandal that may prove the biggest in Japan's postwar history.

Top officials of Tokyo Sagawa Kyubin stand accused of fraudulently arranging billions of dollars in loans to firms they controlled and to companies fronting for a major yakuza, or gangster, syndicate. They reportedly obtained tens of millions of dollars in kickbacks from that pool of money and used the funds to make contributions to powerful politicians.

Hiroyasu Watanabe, Tokyo Sagawa Kyubin's former president, was arrested Friday along with three other men, and analysts believe important political heads are sure to roll.

On one level, the affair bears some resemblance to the scandals that frequently afflict the trucking industry in the United States. In Japan, as elsewhere, trucking is a business that seems to attract a certain amount of shady dealing and involvement with muscular men in suits.

But on another level, the Sagawa Kyubin tale is a quintessentially Japanese one, illustrating the way companies on the fringe of respectability sometimes behave to obtain political favors and secure a place alongside the Toyotas and the Hitachis of the world.

The companies that get caught up in bribery scandals "are never the big guys from Keidanren," which is Japan's premier big business group, said Cornelia Meyer, a political analyst with UBS Phillips & Drew International and a former staff member for a Japanese member of parliament.

Upstart companies such as Sagawa Kyubin, Meyer said, are "not part of polite society" and are much more likely to deem it necessary to obtain friends in high places to show their adversaries and Japan's powerful bureaucrats they have clout.

Sagawa Kyubin's 69-year-old founder, Kiyoshi Sagawa, is the classic aggressive upstart, willing to bend the rules of polite society in an effort to race ahead.

According to Japanese media reports and people familiar with the group, Sagawa ruthlessly pushed for growth, offering his novice drivers much higher pay than his rivals _ indeed, much higher pay than most college-educated white-collar workers. With nothing more than a driver's license, a man in his 20s could get the same amount of money as an average department head at a large company.

But the flip side was that employees were expected to work punishingly long and hard, with snap demotions facing drivers and managers who failed to meet their quotas.

Sagawa Kyubin drivers are famous for galloping to the door under the weight of a 50-pound box and rushing back to their trucks for the next stop. Many found they could stand the job for just a few years, but they were easy to replace with new men eager for the money. "Work twice as hard as the others and get paid three times as much," Sagawa reportedly said.

Sagawa expanded the business from its base in Kyoto by bringing local delivery companies into his group, converting the trucks _ and the management philosophy _ to Sagawa Kyubin's. Among these companies was one belonging to Watanabe, the man arrested Friday. Because his Tokyo operation was by far the biggest single affiliate, Watanabe became the No. 2 power within the group, and he reportedly exercised considerable autonomy over his Tokyo fiefdom.

The rapidly growing group frequently found itself in trouble with the government. The Transport Ministry, which had the power to dispense operating licenses, cited Sagawa Kyubin on occasion for operating outside its authorized territory and for other road violations, and in 1987 the company was denounced in Japan's parliament, the Diet, for forcing its employees to work excessively long hours. Tax officials also cited Sagawa and his group on two occasions for failing to report tens of millions of dollars in income.

With these troubles as a backdrop, both Sagawa and Watanabe eventually became heavy donors to Japanese politicians, who are typically in desperate need of money. Diet members are expected to pay for their offices and staffs and to give presents of cash to constituents at weddings and funerals. Giving them money is legal, provided the amount does not exceed certain ceilings and provided it is not in exchange for favors.

Sagawa boasted recently that his group had "taken care of 280 secretaries," meaning that it had handed over sizable contributions to the aides of 280 members of the Diet. He also liked to boast that he was a key financial backer of Kakuei Tanaka, the former prime minister who was forced to resign after the Lockheed scandal of the 1970s.

Among Diet members, Watanabe was well-known for dispensing tens of thousands of dollars during the traditional summer and winter gift-giving season, according to media accounts. His lavish spending habits at Tokyo nightspots earned him the moniker Otaske-man (Rescue Man) of the Ginza district.

But what ultimately appears to have landed Watanabe in serious trouble was his desire to cozy up to Susumu Ishii, the late boss of Japan's second-largest yakuza group, the Inagawa-kai. Yakuza connections could be helpful for a company whose drivers were frequently having accidents; the fearsome-looking yakuza members are known to be very persuasive in getting people to settle collision claims.

According to prosecutors cited in the Japanese media, starting in the late 1980s Watanabe and a top aide used forged company documents to get financial institutions to make about $800-million in loans to Ishii-controlled companies. Some of the loans came directly from Tokyo Sagawa Kyubin, and some were guaranteed by it.