TOKYO -- Healthcare product rental firm Japan Life Co. faces a criminal investigation for allegedly hiding mounting debts while soliciting customers in violation of a consumer protection law, people familiar with the investigation said.
The Tokyo-based company, which has roughly 6,800 customers across Japan, has already been designated as a pyramid scheme operator by the Consumer Affairs Agency over its magnetic health product rental business. It is undergoing bankruptcy proceedings with a total debt of some 240 billion yen.
The Metropolitan Police Department suspects that Japan Life violated the Act on Specified Commercial Transactions, which bans providers of door-to-door, mail order or telemarketing sales activities from misrepresenting certain information to customers, according to the people close to the investigation.
The police department will shortly ask the lawyer managing the company's bankruptcy proceedings to submit relevant documents. The department is considering whether to press fraud charges in the case while carrying out its investigation in cooperation with the police departments of other prefectures, including Aichi in central Japan, where many victims reside.
In its business scheme, Japan Life had customers buy its products, such as magnetic necklaces, for millions of yen each. The firm then rented the products to third parties, and paid part of the rental fees as dividends to the customer. The company also offered a program that would pay dividends to people who attracted more customers. Some of the victims invited people close to them to join the scheme, expanding the pool of victims.
Japan Life had received orders from the Consumer Affairs Agency to suspend part of its business operations on four occasions since December 2016, and went bankrupt a year later. Its bankruptcy proceedings began with a Tokyo District Court decision in March 2018.
In January 2018, a Japan Life board member approached by the Mainichi Shimbun denied the company acted illegally. "We have adjusted our operations according to the law, and there is no fact of a legal violation," the director said.
Japan Life was originally set up in 1975 by Takayoshi Yamaguchi to produce and sell high-quality down comforters and healthcare goods. It posted sales of 150.9 billion yen in 1985, but sales had dropped to around 20 billion yen in recent years. As of March 2017, the company was saddled with debt totaling 33.8 billion yen. The company had about 80 branches in 37 prefectures.
Yamaguchi, who was also running a company selling air purifiers in the 1970s, was called to the Diet as an unsworn witness for questioning in 1975 over allegations that his practice was "on the verge of multilevel marketing."
In a similar rental scheme case, a wagyu cattle farm Agura Bokujo that went under in 2011 had some 73,000 victims, with the damage totaling 430 billion yen.
(Japanese original by Ikuko Ando, City News Department)