Rebirth in Japan: The Heiress Who Conquered the World

October 30, 1990. Tuesday.

Osaka, Itoman Corporation.

The daylight outside the window was lead-gray, and the sky toward the Dojima River hung very low.

Endo stood before the whiteboard, the marker in his hand drawing a line under the words ”Friday Afternoon.”

Tadokoro sat on the left side of the long table, with three folders of different colors spread out before him.

Yellow was the Itoman trade contract ledger, blue was the warehouse receipt financing number sequence, and white was the cross-reference table compiled by SIS.

”Let’s summarize.” Endo turned around, the cap of his marker still off. ”From last Friday to this morning, we have confirmed several facts.”

His finger moved across the whiteboard.

”First. In Itoman’s Q4 1989 trade contract ledger, there are eleven advance payment records totaling over five hundred million yen. And all eleven of these point to three Kansai shell companies.”

”Second. In the corresponding warehouse receipt number sequence, there are five empty numbers. WH-8912 to WH-8944. These five empty numbers correspond exactly to three of the advance payments with the largest amounts.”

”Third. The margin transfer vouchers show that all three payments eventually entered the third custodial account at the Sumitomo Bank Osaka Main Branch.”

He paused and looked at Tadokoro.

”Did the original contracts arrive this morning?”

Tadokoro shook his head.

”Not yet. Itoman is insisting on the new ’Departmental Classification Filing System.’ The application form from the Trade Department needs the signature of the Trade Section Chief, but he went to a meeting at the Osaka Chamber of Commerce today. We won’t get them until four o’clock this afternoon at the earliest.”

Endo did not press further. He walked to the window. The gap in the blinds was narrower than yesterday — only half a finger wide.

Hmph, guilty conscience.

”But we found something new.” Endo’s back cast a shadow against the window. ”Tadokoro, open that white folder.”

Tadokoro opened the white folder and pulled out a page, placing it in the center of the table.

It was a hand-drawn chart. The horizontal axis was time, and the vertical axis was capital flow. Several lines of different colors intertwined, eventually converging toward the same end point.

”This is an analysis of the sources of all ’overseas repayments’ for Itoman in the fourth quarter.” Tadokoro’s voice was very low. ”After classifying by company name, we discovered a pattern.”

His finger pointed to a red dot in the top right corner of the chart.

”All trade contracts recorded after 3:00 PM on Friday have ’overseas repayments’ whose sources are registered in Kitahama, Chuo Ward, Osaka.”

Endo walked back to the table.

”Kitahama... that is the area where Kansai financial shell companies were most concentrated during the bubble.”

”What about the business scope of these repayment companies?”

Tadokoro flipped to the next page.

”Three are real estate agencies, two are microfinance companies, and there is one... whose business description is written as ’Information Consulting Services’.”

The conference room went quiet.

A crow’s caw came from outside the window, drifting from the other side of the river, dragging out a long tail. There really are so many crows in Osaka.

Endo placed the marker on the table, the cap finally snapped on.

”So, the capital flow works like this.” He didn’t use the whiteboard. He simply drew an invisible line on the desktop with his fingertip. ”Real estate shell companies send money into Itoman’s account under the guise of ’overseas buyer paying the balance’.”

”Itoman records this money as trade repayment, corresponding to a backdated contract. Then, based on this contract, they apply for warehouse receipt financing from Sumitomo Bank.”

”The bank approves it, and the margin is deposited into the custodial account. But the corresponding warehouse receipts —” He paused, ”— are empty. There is no actual record of goods entering the warehouse.” A phenomenon of the bubble period. All procedures were real, but there were no actual goods.

Tadokoro continued: ”Port records show that for those contracts, the difference between the bill of lading date and the warehouse entry date exceeded four months. But in Itoman’s ledger, entry and payment are on the same day.”

”The same day.” Endo repeated the phrase.

He turned to look at the ”Friday Afternoon” line on the whiteboard.

”All abnormal operations occurred after 3:00 PM on Friday. This timing is very subtle.”

Tadokoro nodded.

”The bank’s cutoff time for large transactions is 3:00 PM. Transactions entered after 3:00 PM will not enter the central bank’s clearing system until the following Monday. There is a forty-eight-hour time difference.”

”A forty-eight-hour time difference... enough to take a sum of money, move it from a shell company account, through two or three intermediary accounts, and finally turn it into ’overseas repayment’.”

As Endo spoke, he returned to the window.

Under the lead-gray sky, the surface of the Dojima River shimmered with a dull light.

”The problem now is —”

Before he could finish, footsteps sounded in the hallway.

The footsteps were heavy, the heels of leather shoes clicking on the floor. Soon, the door was pushed open from the outside.

Deputy General Manager Ueba stood at the doorway.

His suit today was dark gray, but he had changed to a navy blue tie woven with very fine silver diagonal stripes. He wasn’t holding the paper with the four rules printed on it, but his eyes were harder than yesterday.

He rested his hand on the doorframe and stood for two seconds before speaking.

”Mr. Endo, may I take five more minutes of your time?”

Although he assumed the posture of asking for an opinion, there was absolutely no request in his tone.

Endo turned around, not pursuing the rudeness.

”Please.”

Deputy General Manager Ueba walked in but did not sit down.

His gaze swept over the documents spread on the table and finally landed on the white chart.

His pupils contracted slightly, but his expression did not change.

”Regarding the scope of your current audit.” Deputy General Manager Ueba emphasized every word. ”My side needs to make a supplementary explanation.”

Endo stood where he was, not moving. ”Please speak.”

Deputy General Manager Ueba pulled a piece of paper from his inner pocket.

”According to Article 7, Section 3 of the ’Comprehensive Credit Agreement’ signed between our bank and Itoman Corporation —”

”’Documents involving bank credit review, custodial account operations, and letter of credit number management belong to the category of confidential information agreed upon in the agreement. Without written consent from the creditor, the debtor and its associated audit parties may not copy, excerpt, or transmit them in any form.’”

After finishing, he put the paper down.

”This supplementary opinion applies to all documents related to warehouse receipt financing and margin transfers that you are currently reviewing.”

The conference room was very quiet. Tadokoro’s pen stopped in mid-air. Nagai kept his head down, fingers rubbing the edge of his notebook.

Endo looked at Deputy General Manager Ueba.

Three seconds.

Five seconds.

Then he tilted his head slightly, his gaze landing on the paper in Deputy General Manager Ueba’s hand.

”Mr. Ueba.” Endo’s voice was very soft. ”The clause you just cited is an agreement between Itoman and Sumitomo Bank. Is that correct?”

Deputy General Manager Ueba nodded.

”Yes. This is a confidentiality agreement between the creditor and the debtor.”

”Then —” Endo put his hands into his suit pockets, ”— the party bound by this agreement should be Itoman Corporation, and the legal representative who signed the agreement on behalf of Itoman.”

He paused for a beat.

”We are a third party commissioned by the Sumitomo Main Family to audit Itoman. Our authorization letter was signed by Mr. Sumitomo Yoshio.”

”The scope of authorization is ’to verify the trade settlements, warehouse receipt financing, overseas accounts receivable, and transactions with the Main Family’s asset management accounts of Itoman Corporation and its affiliated companies’.”

Endo’s gaze returned to Deputy General Manager Ueba’s face.

”The confidentiality clause you cited binds Itoman. Not the Sumitomo Main Family. And certainly not the audit party commissioned by the Main Family.”

Deputy General Manager Ueba’s Adam’s apple bobbed. He pressed his lips together, his jawline tensing into a rigid arc.

”Mr. Endo.” His voice dropped half a degree. ”As the creditor, the bank has a responsibility to protect the integrity of information involving our credit decisions from being leaked. The documents you are currently reviewing, although in form they belong to Itoman, their content deeply intersects with the bank’s credit process.”

”Once this information flows out of this conference room in any form —” He paused, ”— the bank will be unable to assess potential information leakage risks.”

Endo did not respond. He walked to the table and picked up the white chart.

In the bottom right corner of the chart, a line of small text was marked in red ink: ”Source of Repayment: Kitahama Shell Company Cluster”.

He held the chart up to a height where Deputy General Manager Ueba could see it.

”Mr. Ueba. All the data on this chart comes entirely from Itoman’s own trade contract ledger, bank transfer vouchers, and public records from the Japan Maritime Cargo Insurance Association.”

Endo placed the chart back on the table.

”Not a single line of data was retrieved from Sumitomo Bank’s internal system.”

Deputy General Manager Ueba narrowed his eyes.

”Itoman’s own transfer vouchers are printed with the payee’s name and account number.” Endo continued, his speaking speed a fraction slower than before. ”This information is in the filing cabinets of Itoman’s Finance Department. We do not need Sumitomo Bank’s permission to review these files.”

He paused for a beat.

”If Sumitomo Bank believes that the documents in Itoman’s Finance Department’s filing cabinets also belong to bank confidential information —” Endo lifted his chin slightly, ”— then please submit a written objection to the Main Family audit team as a creditor.”

”The objection letter needs to state: Your bank claims that the trade vouchers kept internally by the debtor, Itoman, contain secrets that the bank cannot audit.”

Deputy General Manager Ueba’s face changed.

His fingers clenched tightly around the handwritten paper, the edge of the paper curling into a tiny arc at his knuckles.

He dared not write it.

Once that sentence was written, it would be a public admission: Sumitomo Bank was deeply involved in Itoman’s trade structure, to the extent that the debtor’s own trade vouchers had become the bank’s secrets.

That was a bomb that would blow up the entire credit system.

The conference room door was pushed open again.

Kawase Masahiro stood at the doorway.

He held a document in his hand. The paper was washi, with somewhat rough edges.

”Mr. Ueba, excuse me.”

Deputy General Manager Ueba turned around. His shoulders stiffened the moment he saw Kawase.

Kawase did not look at him. He walked to Endo, bowed slightly, and handed over the washi document.

”Mr. Endo, this is supplementary authorization from the Sumitomo Main Family regarding the audit team’s authority.” His voice was steady. ”The scope of authorization includes: To verify the authenticity of the debtor’s trade, the audit team has the right to review all original or copied trade vouchers kept internally by the debtor, and has the right to conduct independent analysis and cross-verification of the content of the vouchers.”

He paused.

”This authorization does not require the consent of the creditor.”

This sentence was meant for Deputy General Manager Ueba.

Deputy General Manager Ueba stood there, the paper in his hand hanging at his side, his fist deeply clenched.

Endo took the washi document and unfolded it.

On the paper was Mr. Sumitomo Yoshio’s personal seal. The red ink had already dried, and the edges were slightly blurred.

He finished reading and closed the document.

”Thank you, Mr. Kawase.”

Kawase nodded. Then he turned to Deputy General Manager Ueba.

”Mr. Ueba.” His tone remained steady. ”The Article 7, Section 3 of the ’Comprehensive Credit Agreement’ you just mentioned was reviewed again by the Main Family Legal Department this morning.”

Deputy General Manager Ueba looked up.

”The party bound by this clause is indeed the debtor, Itoman, and its affiliates.” Kawase said, ”It does not apply to the independent audit party commissioned by the Main Family. The supplementary opinion you have in your hand —” His gaze landed on the paper Deputy General Manager Ueba was about to crush, ”— if you continue to insist on it, you may need to submit a formal legal opinion to the Main Family Board of Directors.”

”The opinion letter would need to argue why trade vouchers kept internally by the debtor would be included in the scope of bank confidentiality.”

Deputy General Manager Ueba’s breathing grew heavier. His chest rose and fell twice before he suppressed the breath.

”...I will convey this to the Compliance Department of the Head Office.” His voice was very hard, as if squeezed through his teeth.

”No need.” Kawase’s tone softened by a fraction. ”The Main Family Legal Department has already written directly to the Osaka Main Branch Compliance Section. Regarding the definition of audit authority, the Main Family’s authorization shall prevail.”

Deputy General Manager Ueba did not speak again. He folded the handwritten paper and put it into his inner pocket.

Then he took a long look at Endo.

”Mr. Endo, you... and that Eldest Miss, are both very excellent.”

”But this is Osaka, not Tokyo.”

After saying this, he turned around immediately, his heels clicking twice on the floor, opened the door, and walked out.

After the door closed, the conference room was quiet for a full ten seconds.

Tadokoro was the first to move.

He let out a long breath, and his shoulders relaxed.

”He’s gone.” Nagai said in a low voice.

Endo did not respond. He walked to the window and pulled the gap in the blinds open by another finger — now he could see half a window of the third floor of the Sumitomo Bank Osaka Main Branch across the street.

”Continue.” He said.

Tadokoro immediately opened the white folder. ”Based on the data we have, we can reverse-engineer the complete capital chain.”

He walked to the whiteboard and picked up the marker.

”Step one: Kansai real estate shell company A transfers 100 million yen to Itoman under the guise of ’overseas buyer paying the balance’. Time: Friday, 3:20 PM.”

”Step two: Itoman’s Finance Department enters this money into the trade contract ledger at 3:45 PM on Friday, corresponding to contract number CT-890712. The contract signing date is backdated to October 12th.”

”Step three: At 4:10 PM on Friday, Itoman applies for warehouse receipt financing from Sumitomo Bank Osaka Main Branch based on the CT-890712 contract, for an amount of 30 million yen. A margin of 9 million is transferred to the third custodial account.”

”Step four: On Monday morning, the central bank’s clearing system begins processing this transfer. The funds complete clearing at noon on Monday, transferring from Itoman’s account to the custodial account.”

”Step five: The corresponding warehouse receipt number WH-8919 — this number exists in the ledger. But the entry records of the Osaka Port bonded warehouse show that the goods corresponding to this number had an entry date of November 3rd.”

Endo stood by the window, his back to the whiteboard.

”November 3rd.” He said. ”A full week later than the payment date.”

”And.” Tadokoro added, ”The description of the goods on the entry record is ’industrial chemical reagents’, but the goods written in the CT-890712 contract are ’precision instrument parts’.”

”The goods don’t match.” Endo said.

”The goods don’t match.” Tadokoro nodded. ”The letter of credit number is real, but the trade fact does not exist.”

He put down the marker and turned to face Endo.

”Obviously, this cannot be some accounting error. What they have done is a closed-loop financing letter of credit structure.”

”Using real estate funds, packaging them as trade settlements, and then extracting real cash from the bank through fake warehouse receipts.”

Endo turned around.

There was no expression on his face. But Tadokoro saw the tip of his right index finger tapping three times on the seam of his trousers.

”Make this analysis.” Endo said, ”Into a formal report.”

Tadokoro picked up his pen. ”Title?”

Endo walked back to the table and slowly put the white chart into his briefcase.

”Itoman Corporation Q4 1989 Trade Financing Anomaly Analysis Report.” He said.

Then he paused for a beat.

”Subtitle: Friday Afternoon Backdated Transaction Chain Anomaly: Cross-contamination of Trade Financing and Real Estate Repayments.”

The lock of the briefcase clicked shut. Endo straightened up, holding the briefcase handle in his palm.

”Last line.” He said, his voice very soft.

”The letter of credit number is real.”

”The trade fact does not exist.”