TOKYO -- "Around here, I think businesses encounter it almost every month. It's an old trick that's been going on since after the war, but it hasn't disappeared," said an executive of a major Japanese firm as we spoke in Tokyo's Marunouchi business district, where many of Japan's major companies have their headquarters. The "trick" they were talking about is known in business circles as "M fund fraud."
The story told to its targets goes like this: "Immediately after the war, when the Allied Powers' General Headquarters (GHQ) occupied Japan, they confiscated a huge amount of secret funds from the Japanese Imperial Army. We're offering it to you, under the table."
The M in the name of the scam apparently refers to the surname of William F. Marquat, a major general in the U.S. military who was head of economic and scientific section at GHQ and ostensibly in charge of funds management.
Individuals who fall for the scam can lose huge sums in so-called "processing fees" to access the elusive money. Many of the victims have been business people including high-ranking employees at big companies.
The Mainichi Shimbun decided to investigate the background to the stubbornly persistent fraud, which has produced countless victims.
In the 1970s, a memorandum showing a president of a major airline had been stung for 300 billion yen (currently worth about $2.7 billion) went public, and they were forced to resign. In recent years, too, it emerged that the head of dining giant Colowide Co. had lost in excess of 3 billion yen (some $27 million) to the scam.
But why do company managers and executives at major firms, whom one would expect to have economic expertise, fall for this fantastical story? Shinya Matsunaga, head of the information section at business analysis firm Tokyo Shoko Research Co., happens to be very knowledgeable about M fund fraud. He attributes the scam's success to the way the fraudsters convince their targets by leaving sophisticated traps all over the place. "They're skilled manipulators," he said.
Their most common method is to send out briefing materials to companies or people's homes which include information on a "fund." Along with the convincing explanation enclosed, the materials also give the impression that other major economists and famous companies are involved, which can be enough to trick a target.
There are also a number of cases involving fraudsters directly visiting companies. In those instances, they use the business cards of politicians or senior government officials they have somehow obtained to claim they were introduced to them, and use the connections to pursue a meeting.
If an individual does agree to meet them, the scammers employ a number of methods to try and trick their targets, saying things like, "Only specially chosen people can use it," and, "There's no legal obligation to return the money, and it's not taxable."
One characteristic of M fund fraud is the astronomical scale of the alleged secret funds. The Mainichi Shimbun obtained a document purporting to be "current certification," which was formerly used in one case. It describes funds of no less than 500 billion yen (some $4.5 billion). The Ministry of Finance stamp the document bears is, of course, fake.
Scammers engaged in M fund fraud often reel out figures in the trillions of yen -- pronounced in Japanese as "cho." As this is the same sound as the counter for blocks of tofu, they're sometimes referred to as "tofu sellers."
Matsunaga said, "The amounts they put forward are so big that victims lose their sense of reality, and then they're told, 'The processing fees only have to be small. Just 1% of the total fund is fine.' They hear that and they end up believing it."
But only a handful of cases come to light. Rumors that someone was hit by M fund fraud intermittently swirl around the business world, but almost all of the stories pass without their authenticity being confirmed or denied.
An individual connected with one company speculated to the Mainichi Shimbun, "In many cases that have actually taken place, people only realize after handing their business cards to these scammers or exchanging the memorandums that it's fraud. Then things turn bad.
"If they try to get their business cards back, they receive demands from fraudsters for settlement fees. The going rate for such fees is in the hundreds of thousands of yen, and at that level, there are a lot of people who keep the payment under wraps, worrying that the matter could become public knowledge."
Perhaps because M fund fraud as a term has become too famous these days, cases with names like "the national project based on Article 44 of the Public Finance Act" and others are on the up.
Article 44 of the Public Finance Act states that in special cases governed by law, the national government can retain special funds. Fraudsters maliciously use this to make it seem as if there is a "secret fund" for specific businesses.
Regarding the scheme, an official at the Finance Ministry spoke decisively: "Funds pertaining to Article 44 of the Public Finance Act require separate legal establishment. In other words, secret, backroom special funds based on Article 44 of the Public Finance Act do not exist. And there is absolutely no documentation on such funds either."
In just a four-month period commencing in January this year, the ministry has reportedly received four consultations regarding cases connected to M fund fraud. "In the event that you are approached, do not trust the other party without due consideration. We ask that individuals first confirm the veracity of claims with Finance Ministry officials," the ministry warns.
M fund fraudsters are continuing to change their methods and materials to scam people with their enticing proposals. In response to the coronavirus pandemic, a new practice has emerged, which involves approaching companies under the guise of a coronavirus support program.
Matsunaga said, "During the coronavirus crisis, the government has devised a number of handouts and support funds for businesses, which has facilitated the spread of speculation that certain companies with close government ties alone are getting preferential treatment. Fraudsters are taking advantage of such 'maybe, and what if,' thinking."
Matsunaga added, "If something sounds suspicious, don't have anything to do with the person telling you about it. That's the thing to remember above all else."
(Japanese original by Kiyohiro Akama, Business News Department)