Ripple effect of Rakuten Mobile embezzlement case threatens subcontractor survival

The Rakuten logo can be seen in this photo taken on June 11, 2019. (Mainichi)

TOKYO – A suspected embezzlement case by an employee of Rakuten Mobile Inc. and numbers at two of the mobile giant’s business partners is threatening the survival of those partners’ subcontractors, leading to layoffs and unpaid wages.

Rakuten Mobile announced on September 2, 2022 that it had fired the employee involved in the case. Sources close to the matter said the employee spoke to executives and other figures from business partners Nippon Logistech Corp. based in Tokyo’s Chiyoda Ward and Trail based in the capital’s Minato Ward have worked together to fill their bills with fake consulting fees and other expenses. The damage is said to amount to 4.6 billion yen or around 35.5 million US dollars. After the employee’s wrongdoing came to light, Rakuten suspended transactions with the two companies and a request for the confiscation of their savings was granted. The fallout was fast and sharp.

On August 31, two days before a wave of layoffs, supervisors and prime contractors began telling their workers and subcontractors across Japan β€” at cellphone base station construction sites, in component warehouses, and elsewhere β€” that β€œit’ll be there starting tomorrow no work” and “Our contract has been canceled by Rakuten Mobile.”

Rakuten had Nippon Logistech Corp. commissioned to manage and transport components for base station construction, and Rakuten orders accounted for more than half of its revenue. The company had no choice but to file for bankruptcy under the Civil Rehabilitation Act shortly after the court seized its bank account. Building Rakuten base stations was also a big part of Trail’s business, and the company had to shut down operations when the wireless giant shut it down. As a result, the many subcontractors of these two companies were pushed to the brink of bankruptcy.

Shinwa, based in Fukuoka Prefecture, is one of them. It had been commissioned by Trail to build base stations for the entire Kyushu region, but in late August 2022, a Trail employee suddenly ordered “stop construction and vacate the sites immediately.” Trail told the subcontractor that he could not make a payment of about 140 million yen, or about $1.08 million, for work already completed because his bank account was confiscated.

Component deliveries are up in the air and employees have been left hanging as funds have been depleted by payments to business partners. Shinwa had to lay off around 30 employees. Shintaro Tsutsumi, the company’s 42-year-old president, has often asked Trail and Rakuten themselves for relief, but says he has received no response.

Last December, Shinwa filed a lawsuit against Trail, demanding payment of the unpaid 140 million yen. Tsutsumi angrily explained, “Why do subcontractors have to pay for a Rakuten employee’s illegal actions?”

Imax, which was hired by Nippon Logistech to manage and transport components through Trail, was also a victim of the Rakuten employee’s alleged embezzlement. The Sagamihara, Kanagawa Prefecture-based company went bankrupt in late 2022, apparently losing around 500 employees across Japan. Many of them are still awaiting outstanding wages and lost earnings compensation, and some have applied to the Tokyo Metropolitan Government’s Industrial Relations Commission for relief.

A 51-year-old woman and former Imax contract worker from Chiba Prefecture has yet to receive her August 2022 salary of about 200,000 yen (about US$1,500). Although she has been looking for a new job since September when she was laid off, she has not found one and is seeking relief efforts. She commented, “Rakuten is also responsible for allowing such careless transactions.”

Hideki Mizuno, a lawyer familiar with labor issues, said: “Termination of a contract with a business partner on suspicion of illegal activity cannot be helped, but in terms of the moral responsibility of a large corporation, Rakuten could at least take measures such as directly engaging subcontractors with.” Work so they don’t go bankrupt.”

In response to a request from Mainichi Shimbun, Rakuten commented, “We are unable to respond or participate in companies entrusted with tasks by our business partners.”

(Japanese original by Nana Hayashida and Ryo Endo, Tokyo City News Department)

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