Japanese firms voluntarily returning illegitimately received COVID subsidies amid crackdown

TOKYO -- More and more companies in Japan that fraudulently received employment subsidies under special relief measures to offset the coronavirus's impact on businesses are voluntarily returning the funds following revelations of illegitimate and unethical receipts by a major travel agency and Diet members' offices.

"From around November last year, there's been a rise in cases of companies contacting us to apologize and return the subsidies. Our investigations of these cases showed they were all illegitimate receipts," a Kanagawa Labor Bureau official revealed. According to the Ministry of Health, Labor and Welfare, as of Jan. 21, a total of 5.26 trillion yen (roughly $45.5 billion) had been distributed in employment adjustment subsidies. Among them, 261 cases were paid to ineligible parties, with total payments reaching 3.2 billion yen (roughly $27.7 million) as of the end of 2021.

While specific case figures of companies voluntarily returning subsidies are unknown, labor bureaus in prefectures including Miyagi, Saitama and Tokyo told the Mainichi Shimbun they have seen a rise in returns of several to tens of millions of yen from parties claiming they received them fraudulently.

One possible reason for the rising cases is labor ministry efforts to crack down on illicit subsidy receipts. Investigation teams set up at labor bureaus nationwide visit companies and do on-site inspections without notice. The ministry is also actively investigating cases revealed by informants. One labor bureau worker said they received extensive information from whistleblowers including former employees.

If huge funds are received illegitimately and the case can be considered highly malicious, authorities disclose information such as a company's name and its representative, and in some cases they even lodge a criminal complaint. Company name disclosures are increasing in many areas. A Miyagi Labor Bureau representative said they think the disclosures are proving effective.

In November 2021, it emerged that around 180 million yen (roughly $1.6 million) in funds may have been fraudulently received by Tokyo-based travel agency World Air-Sea Service Co., then led by representative director Jungo Kikuma, chairman of the Japan Association of Travel Agents at the time. It was also revealed that ruling Liberal Democratic Party (LDP) branch offices headed respectively by former LDP secretary-general Nobuteru Ishihara and former environment state minister Toshitaka Ooka had also received coronavirus employment subsidies. While the payments were legitimately received, the politicians were criticized by people saying the subsidies are designed to ensure job security for employees at companies whose sales decreased suddenly in the pandemic. The Saitama Labor Bureau reportedly saw cases where companies that returned fraudulently received benefits described being afraid after seeing the news.

Regional labor bureaus will also toughen crackdowns on cases of social insurance and labor consultants luring companies into illegal activity. The Tokyo Labor Bureau has confirmed a case where a consultant approached a firm with claims of a subsidy "anyone can receive," and guided them into fraudulently receiving the funds using the names of former employees and relatives who don't actually work at the company. These are malicious fake application cases which exploit the simplified screening process prioritizing swift payments. An individual working closely with one labor bureau said, "We want to impose severe punishments, like disclosing the names of consultants involved in illegitimate activity."

If companies are found to have inappropriately received subsidies, they must return the original amount plus a 20% penalty. They are also disqualified from labor-related subsidies applications for five years. Regardless of if companies voluntarily return money, if their cases are deemed benefit fraud, they are subject to the same penalties. However, consideration may be given to not disclosing company names.

(Japanese original by Natsuko Ishida, Lifestyle and Medical News Department)