THE JAPANESE SUGAR SCANDALS.

Evening Star, Issue 14163, 13 September 1909, Page 8

THE JAPANESE SUGAR SCANDALS.

FORMATION OF THE COMPANY. The Tokio law courts early in July delivered judgment in a ca.se which attvaried unprecedented interest in Japan. Three ye; is ago—that k to say, in the immediate sequel of *he war with Eussia--Vhen a coivmeivial boom was beginning to assert itself in Japan, several sugar refineries in that country combined to form the "Great Japan Sugar Company." with a capital of £1,200.000. and a branch in Formosa. Up to that time the Japanese market had been mainly supplied from Hongkong, where two refineries existed under the auspices of leading British funs. It was confidently believed, however, that this competition from abroad would ultimately be broken down, and Ihe Great Japan Company received a hearty welcome from the public. Its early recoi'd verified that forecast, for it paid dividends of 64 per cent., 20 per cent., 17J per cent., and 15 per cent, {twice) in successive half-years between July t, 1906. and December 31, 1908. Nevertheless, handsome as these returns were, their steadily declining dimensions and the gradual spread of rumors—never convincingly related—to the effect that the last two of the above dividends had been defrayed with money obtained by defrauding the Customs, caused such a lor's of confidence that from the close of 1907 to the autumn of 1908 the company's £5 shares were never quoted' higher than £7 10s. —The Smash.— Then a catastrophe occurred. A bank which find granted large accommodation to the company fell into difficulties, and the measures taken by its creditors led to startling disclosures. The company was virtually bankrupt. It owed some £400.000 to the Customs; its other debt amounted to nearly the whole of its capital, and some of its directors were found to have been speculating largely with its shares, crediting to then-selves the results of profitable transaction<s and debiting the unprofitable to the company. These revelations produced something like a panic. They suggested that other nominally flourishing companies also be whited sepulchres, .ind that the whole system of auditing accounts in Japan stood in need of drastic reform. The share market, which had just begun to recover from the panic following the post-bellum boom, fell again into a slough of despondency, and the air began to be filled, with disquieting ill mors.

—Members of i Parliament Implicated.— There was, moreover, a far more flagrant feature. It transpired that the dishonest directors had been tampering with members of the House of Representatives ; and one morning the citizens of Tokio learned that several prominent politicians had been apprehended and their houses subjected to rigorous search by the police. Each succeeding day saw additions to the ranks of these 6uspects, until finally no fewer than twenty-four members and exmembers of the Lower House of the Diet were in custody. On two occasions the directors of the company had resorted to bribes. The first was in the 23rd session (1906-07) of the Diet, in connection with a Government Bill for encouraging the exjiort of sujar by granting a rebate of the consumption tax. This measure passed by a large majority, and would probably have been adopted on its merits without recourse to corruption. The second was in the 24th session (1907-08). At that time ruin and exposure stared the directors in the face, and they conceived the desperate expedient of inducing the Government to create a State monopoly of sugar, as had been already done in the case of sake, salt, tobacco, and camphor. It does not appear that the authorities were unduly approached in connection with this scheme. The directors confined themselves to purchasing support in the Lower House. ' In every instance their corrupt overtures seem to have been accepted, but although something like £12,000 —a very large sum in Japan—was paid out, the proposal encountered such stroiig official opposition that it never reached the stage of parliamentary discussion. There was no exposure, however, until the failure of the Fujimoto Bank in the autumn of 1908 brought the company's affairs under the searcblight. —The Police Take a Hand.— Even then several months elapsed before the police stretched out their hands—so many months that impatient murmurs began to be audible in many quarters. But the delay proved to have been devoted to collecting evidence. In' April the arrests began, and, following each other in quick 6bccession, they ultimately numbered twenty-four members or ex-memhers of the Diet, as-well as five directors of the comprny. Every political party in the State was involved. It cannot be said, however, that the incriminated men were in any case political leaders of the first rank. They belonged rather to the category of sectional heads, each with a following sufficient to make their combination formidable. Among them, however, was a man who had been at one time president of the American Board Mission's flourishing college in Kioto, and whose name, up to the moment of his arrest, had stood for everything upright and honorable. This man together with three others made frank and full confession of their guilt, and it was expected that their penalty would he a short term of deferred imprisonment—i l other words, that they would be sentenced but not actually punished. —The Result of the Trial.— The Judges, however, took a different view. Out of the twenty-four accused they acquitted one; condemned the rest to major imprisonment for terms varying from three to ten months; and deferred the execution of the sentence in seven cases, but extended that indulgence to only one of the throe men with whom the public had specially sympathised. All were ordered to refund the money received by them, the amounts varying from £4O to £2,000. As for the directors, their trial is not yet concluded. It was vcrv noticeable that a radically divergent view

j was by the newspaper Press and by ! the counsel"retained for the defence. More j/than soventy barristers pleaded for Ih-j ! accused and almost without exception : their ropeals were founded on the ,proportionati y great disgrace and pain suffered by pe'sons enjoying high social positions when ;he criminal laws were enforced against them. The newspapers, on the contrary, contended that such persons should be punished with additional ity, since their crime was aggravated by indifference to their duty as moral examples. Fortunately, the' Court took the latter view. ■ " : ;

t —The Public Standpoint.— ; It goes without saying that this incident has given a severe shock to public respect, for the Lower House of the Diet, and lo public confidence in the integrity of Japanese business enterprise. The latteHfecling is likely to be short-lived, especially as a probable outcome of the affair will" be the organisation of a system of chartered accountants. But the reputation of the House of Representatives is effectutiliv smirched; and there will certainly aecWe a marked increase of credit to Conservative politicians who oppose party Cabinets and to the House of Peers as an incorruptible guardian of national interests. From no point of view does any material extenuation of the disgrace present itself, except, perhaps, from the historical fact that victory m war generally exercises a demoralising influence. Even that excuse, however, requires ils to assume that these evil practices were limited to post-bellum days, an inference not supported by the evident facility with which the various transactions were consummated, or by the recollection that talk of parliamentary dishonesty has been heard in Japan for the. Pj* st fifteen years. , Discovery might probably have come long ago had'circumstaiues conspired to facilitate it.