Interrogating Corporate Crimes in Japan: Key Considerations for Bribery and Breach of Trust Cases

Corporate crime, with its potential to inflict significant economic damage and erode public trust, presents unique challenges for investigators worldwide. In Japan, specific legal frameworks address misconduct by company officials, notably bribery involving directors under the Companies Act and the broader offense of breach of trust, applicable under both the Penal Code and the Companies Act. Interrogations in these cases are often intricate, requiring a deep understanding of corporate governance, financial dealings, and the nuanced legal elements that define these offenses, particularly those related to an individual's duties, authority, and subjective intent.

Bribery Involving Company Directors: Companies Act Article 967

While bribery is commonly associated with public officials, Japanese law also specifically criminalizes the bribery of directors and other key personnel of stock companies (kabushiki kaisha 株式会社). This is primarily governed by Article 967 of the Companies Act.

Legal Framework:

• Article 967(1) of the Companies Act stipulates that if a director, auditor, executive officer, or other specified individuals associated with a stock company accepts, demands, or promises to accept a financial or other benefit in connection with their duties, in response to an "illicit solicitation" (fusei no seitaku 不正の請託), they are subject to punishment (imprisonment for up to five years or a fine of up to JPY 5 million).
• Article 967(2) correspondingly punishes the individual or entity that gives, offers, or promises such a bribe (imprisonment for up to three years or a fine of up to JPY 3 million).

This provision has historical roots, with its antecedents in the former Commercial Code. Its enactment was partly spurred by events like the Teijin Incident in the 1930s, a major political scandal involving alleged bribery of officials related to a company's shares, which underscored the need to hold powerful corporate figures accountable for corruption, treating it with a seriousness comparable to bribery in the public sector.

Key Elements and Interrogation Focus:
Successfully interrogating suspects in a Companies Act bribery case requires a meticulous focus on proving several key elements:

1. "In Connection with Their Duties" (Sono Shokumu ni Kanshi その職務に関し): It is essential to establish that the benefit was sought or received in relation to the director's specific duties and responsibilities within the company.
   • Defining Official Authority (Shokumu Kengen 職務権限): Investigators must clearly delineate the suspect's official powers and duties. This involves not only examining formal documents like articles of incorporation, internal company regulations, and board resolutions but also understanding the director's de facto authority and influence within the corporate structure. Objective evidence, such as internal memos, minutes of meetings, or purchase orders addressed to or approved by the suspect, becomes crucial. This investigation into a suspect's shokumu kengen should ideally be completed early in the investigation, often before coercive measures like arrests or searches are initiated.
2. "Illicit Solicitation" (Fusei no Seitaku 不正の請託): This is often the most challenging element to prove and a frequent point of contention.
   • "Solicitation" (Seitaku 請託): This refers to a request made to the director to perform a specific act (or to refrain from performing an act) that falls within the scope of their duties.
   • "Receiving" (Ukete 受けて) the Solicitation: It implies more than just passively hearing the request; it means the director consented to or accepted the solicitation.
   • "Illicit" (Fusei 不正): The solicitation must be for an "illicit" act. This generally encompasses any conduct that would violate the director's duties to the company, such as their duty of loyalty or care. Examples discussed during the original legislative considerations included a director intentionally refusing a legitimate share transfer at the behest of a bribing party, or a director causing the company to purchase materials at an inflated price in exchange for a personal kickback. Other illicit acts could involve the abusive issuance of company promissory notes, actions that contravene laws or the company's articles of incorporation, or any conduct intended to cause financial harm to the company (which often overlaps with breach of trust). Interrogations must meticulously explore the nature of the request and why it was considered "illicit."
3. "Financial or Other Benefit" (Zaisan-jō no Rieki 財産上の利益): The investigation must prove the actual receipt, demand, or promise of a tangible benefit by the director. This can range from direct cash payments to shares, loans on favorable terms, or other valuable considerations.

Investigative Challenges and Strategies:

• These bribery arrangements are typically clandestine, making direct evidence scarce. Investigators often rely on circumstantial evidence, financial records, and the testimony of cooperating witnesses (including, potentially, the bribe-giver).
• A noteworthy point is that investigators examining broader corporate misconduct (such as accounting fraud or breach of trust) should remain alert to the possibility that Article 967 bribery might also be present. Some commentators suggest this provision might be underutilized due to a lack of familiarity among some investigators compared to, for example, breach of trust charges.
• The interrogation approach itself mirrors that used in public official bribery cases, with a strong focus on unraveling the communications and understandings that constituted the "illicit solicitation" and establishing a clear quid pro quo between the benefit conferred and the director's improper actions or omissions related to their duties.

Breach of Trust (Hainin 背任) and Special Breach of Trust (Tokubetsu Hainin 特別背任)

Breach of trust is a more general offense applicable to anyone who administers affairs for another, while special breach of trust under the Companies Act specifically targets company directors and similar fiduciaries, often carrying heavier penalties.

Legal Framework:

• Penal Code Article 247 (Breach of Trust): This article defines the offense as committed by "a person who administers affairs for another, for the purpose of promoting his/her own interest or the interest of a third party, or for the purpose of inflicting damage on the principal, commits an act in breach of his/her duty and causes financial loss to the principal." Punishment includes imprisonment for not more than five years or a fine of not more than JPY 500,000.
• Companies Act Article 960(1) (Special Breach of Trust): This applies the core principles of breach of trust to specified company personnel (directors, accounting advisors, auditors, executive officers, etc.), making them liable if they act for their own benefit or that of a third party, or to inflict damage on the stock company, in breach of their duties, thereby causing financial loss to the company. The penalties are more severe, reflecting the heightened fiduciary responsibilities of corporate leadership.

Key Elements and Interrogation Focus:
Interrogations in breach of trust cases are often complex due to the need to establish several interlocking elements, including subjective intent.

1. "Administering Affairs for Another": For company directors acting on behalf of their corporation, this element is usually straightforward.
2. "Act in Breach of Duty" (Ninmu Ihai Kōi 任務違背行為): This is a central and frequently contested element. The prosecution must prove that the director's action (or culpable inaction) violated their fundamental duties to the company, primarily the duty of loyalty (chūjitsu gimu 忠実義務) and the duty of care of a prudent manager (zenryō na kanrisha no chūi gimu, often shortened to zenkan chūi gimu 善管注意義務).
   • Examples include approving excessively risky loans without adequate collateral or due diligence, selling company assets at significantly undervalued prices, purchasing goods or services for the company at inflated prices for personal or third-party gain, or failing to take necessary actions to protect company assets.
   • Interrogations must meticulously examine the decision-making process behind the impugned act. What risk assessments were conducted (if any)? Were internal company rules, procedures, or expert advice followed or ignored? Was the decision a defensible, albeit ultimately unsuccessful, business judgment, or was it a clear and unjustifiable dereliction of duty?
   • The suspect's recognition (even if only a constructive or "willfully blind" recognition—mikakuteki ninshiki 未確定的認識 and acceptance—yōnin 容認) that their conduct constituted a breach of duty is also a key aspect.
3. "Causing Financial Loss to the Principal" (Zaisan-jō no Songai 財産上の損害): The prosecution must demonstrate that the company suffered actual financial damage or was exposed to a concrete risk of such damage as a direct result of the director's breach of duty. This often requires detailed financial analysis, valuations, and sometimes expert testimony.
4. "Purpose of Promoting Own/Third-Party Interest or Inflicting Damage" (To-ri Kagai Mokuteki 図利加害目的): This subjective intent element is often the most difficult to prove and the most vigorously defended.
   • Interrogations will probe the director's true motivations. Were they genuinely attempting to benefit the company, even if the decision ultimately proved unwise (which might negate this specific intent element, though it could still be a breach of the duty of care)? Or was their primary, overriding aim to illicitly enrich themselves, an associate, or another entity, or to deliberately cause harm to the company?
   • Japanese case law, such as a Supreme Court decision on August 12, 1960 (Keishū Vol. 14, No. 10, p. 1360), has established that if the primary motive was illicit self-interest or benefit to a third party, the crime can be established even if there was a secondary, minor intention to also potentially benefit the company (e.g., hoping a risky loan to an affiliated company might eventually help the principal company by saving the affiliate). Conversely, if the director’s actions, though perhaps misguided or negligent, were undertaken with the genuine and primary aim of benefiting the company, it becomes much harder to prove the specific intent required for breach of trust.
   • Courts analyze this by looking at the nature of the breach of duty, the foreseeability of loss, and any benefits that accrued to the director or third parties versus any plausible (not merely speculative) benefit to the company. For example, a Hiroshima High Court (Okayama Branch) decision on April 19, 2017, involved a director who approved large, unsecured loans to a financially unstable company. The first instance court convicted, finding the director’s claims of intending to benefit his own company through this risky venture to be mere hopeful thinking. The appellate court, however, overturned the conviction, introducing a controversial "balancing test" and finding that the possibility the director's primary motive was to benefit his own company could not be ruled out beyond a reasonable doubt. This illustrates the complexities and varying judicial approaches to this element.

Common Challenges in Interrogating Corporate Officials

Investigating and interrogating alleged corporate crimes involving high-level officials often presents distinct challenges:

• Sophistication of Suspects: Company directors and executives are often highly educated, articulate, and may possess a degree of legal or financial literacy, enabling them to mount sophisticated defenses or skillfully deflect questions.
• Complexity of Transactions: The underlying financial dealings can be exceptionally complex, involving intricate corporate structures, multiple jurisdictions, and sophisticated financial instruments. Investigators must possess or have access to considerable financial and accounting expertise.
• Diffusion of Responsibility: In large corporations, decision-making is often a collective process. It can be difficult to isolate the actions and specific criminal intent of individual directors within a web of board approvals, committee recommendations, and delegated authority.
• The "Business Judgment Rule" as a Defense: A common defense strategy is to argue that the impugned action, while perhaps unsuccessful in hindsight, was a legitimate exercise of business judgment made in good faith, rather than an intentional breach of duty for an illicit purpose. Interrogations must be prepared to deconstruct such claims by examining the reasonableness and diligence of the decision-making process.
• Heightened Resistance Due to Stakes: As with public officials, corporate executives facing accusations of serious crimes stand to lose not only their liberty but also their careers, reputations, and social standing. This often results in very strong and persistent denials during interrogation. Investigators must be prepared for protracted and challenging interactions.

Investigative Flexibility and Legal Framing

It's also important for investigators to maintain flexibility in their legal framing of a corporate misconduct case. The factual lines between breach of trust, embezzlement (ōryō 横領 – where an individual misappropriates assets they lawfully possess for another), and fraud (sagi 詐欺 – deception leading to the delivery of assets) can sometimes be blurred. For instance, if a director deceives the company's finance department into releasing funds for a purported company purpose while intending to use them personally, the facts might support fraud or embezzlement in addition to, or instead of, breach of trust. As new information emerges during the investigation and through interrogations, the most appropriate legal charge may evolve.

Conclusion

Interrogating corporate crimes such as bribery of directors and breach of trust in Japan demands a profound understanding of complex legal elements, particularly those relating to an official's duties, their scope of authority, the specific nature of their actions, and, crucially, their subjective intent and motivations. Success in these challenging investigations hinges on meticulous preparation, a sophisticated grasp of corporate governance and financial principles, and highly skilled interrogation techniques capable of navigating the intricate defenses and significant resistance often encountered when dealing with corporate officials. The overarching goal remains the elucidation of substantive truth and the upholding of corporate integrity within the bounds of the law.