Cargill and ORIX in Yakuza Love Hotel Scandal

日本語訳 - 

NYT記事日本語訳 カーギル, カーバルの「ラブホテル」の売却を巡る対立

There's a youtube account which has some dramatic footage of what went down - 
http://www.youtube.com/user/katotomoyasuorix/videos?view=0

Further videos recording the interaction between Kato and ORIX staff, the Police and operational staff at the hotels -

http://i.youku.com/u/id_UNTMwNTc3NDgw

Not the first time Cargill has had relations with the yakuza.
http://www.usnews.com/usnews/biztech/articles/980413/archive_003691_2.htm

Cargill has had problems with Asian real estate investment in the past as well it seems-
Lawsuit Accuses Cargill of Bribery In Thai Venture
For those without access past the paywall -
www.citizenstrade.org/ctc/wp-content/uploads/2011/05/wsj_cargillbribery_may2004.pdf

 

Some background (Japanese) on the arrest of Kato's employees in 2008 for breaching laws regarding the sex business -   http://tokumei10.blogspot.com.au/2008/04/blog-post_15.html

KAWAGOE, Japan — Several years ago, an investment subsidiary of the agricultural giant Cargill bought a group of so-called love hotels, which typically rent rooms by the hour, including the neon-lit Hotel Shine in this sprawling Tokyo suburb.

 Though many industry analysts say love hotels in Japan are a good cash flow business — catering to young married couples living with family, as well as to philanderers, prostitutes and even penny-pinching tourists — the Cargill subsidiary was disappointed with its results. The unit, CarVal Investors, sold the 10 properties last week for about $20 million, far less than the $60 million it paid for them in 2004 and 2005.

It might have been just another fire sale. After all, many American funds invested in distressed properties at the height of Japan’s economic woes without success.

But CarVal is now under fire from former employees and business partners in part because of the tough tactics of the new owner: an affiliate of a Japanese developer, the Kato Pleasure Group. Immediately after closing the sale on Thursday, the buyer dispatched groups of black-suited men to force out hotel workers and even hotel guests, barricading the entrances with wooden fences.

About 300 hotel workers have been left in the lurch. They are planning a rally outside Cargill’s Tokyo offices this week to protest their treatment. Two executives who managed the hotels under contract during CarVal’s ownership have refused to leave and remain inside Hotel Shine — a standoff that has drawn the attention of the local police.

The most vocal opponent of the sale, however, is CarVal’s former partner, Alchemy, which had a contract to manage the hotels. In registered letters, filed in court, Alchemy contends that CarVal violated business agreements by selling the properties before their contract was up in October 2014.

In submissions to both the local Tokyo and Saitama Metropolitan Police, Alchemy also contends that Kato Pleasure has ties to Japan’s criminal underground and that CarVal ignored repeated warnings — backed up by outside research — not to go through with the sale.

“Our complaint to CarVal is that they ignored credible advice that they were dealing with a suspected organized crime entity,” said Miro Mijatovic, Alchemy’s chief executive.

CarVal says Alchemy’s accusations are baseless. Kato Pleasure also denies that it has criminal links, but it provided little response to questions posed to a spokesman at its Tokyo headquarters and to company representatives at Hotel Shine. The new owner of the hotels is Plus Ten Mind, a company affiliated with Kato Pleasure that shares the same chief executive.

Ann Folkman, a managing director at CarVal, said there were sound reasons to do business in the hotels. “While leisure hotels may sound salacious, they are a legitimate and longstanding industry that caters to the privacy needs of young Japanese adults, who frequently live with their parents or in company-provided housing,” Ms. Folkman wrote in an e-mail. “As with many of the hotels we have invested in across the world, the investment strategy was to run a compliant business, create sufficient scale and operational regularity and then exit to a buyer who could see the value of the business.”

CarVal’s exit came shortly after 3 p.m. on Thursday, when groups of men who said they were affiliated with Kato Pleasure made a coordinated sweep of the hotels, forcing out the staff, emptying hotel rooms of frightened guests, putting up makeshift fences and changing the locks in preparation to install Kato’s own management and workers.

Takashi Hayashi, the chief executive of Urban Resorts, a unit of Alchemy contracted to run the hotels’ daily operations, who has refused to leave Hotel Shine, seemed shaken as he spoke to a reporter through a tall fence on Saturday. He was flanked by two men who he said worked for Kato Pleasure, who refused to speak to a reporter. Around the compound, six workers were putting the finishing touches on barricades at the hotel’s entrances.

“I’m fine,” Mr. Hayashi said. “I have no intention of leaving.”  

Ms. Folkman said CarVal had no involvement in the hotel sweeps. She suggested that Alchemy, which was hired in 2008 to manage the hotels, had encouraged the employees to remain to attract publicity. “We believe Alchemy’s dissatisfaction with the sale is motivating their behavior,” she said, “and we believe many of the claims they are making to The New York Times and others are wholly without merit.” She said that Alchemy was trying to protect its own business and that it had demanded 300 million yen ($3.9 million) to leave the hotels. The demand, she said, was “without any legal basis.” Alchemy, she said, has tried to disrupt the sale because it would like to buy the hotels.

 Mr. Mijatovic countered that Alchemy’s agreement with CarVal had two years remaining and that his company had sought the money to make up for fees lost because of the early termination.

CarVal, which became a wholly owned subsidiary of Cargill in 2006 and now has $9 billion under management, was one of the first American companies to buy portfolios of bad loans and distressed properties after Japan’s real estate collapse in 1990. Since then, investors ranging from Goldman Sachs to smaller vulture funds have paid fire-sale prices for properties.

Love hotels, while tricky to manage, are attractive to investors because of their stable, strong cash flow and high yields. At Hotel Shine, about 3,000 yen, or $38, buys 90 minutes in a bland room dominated by a king-size bed. According to Leisure hotel, a trade publication, the industry has sales of 2 trillion to 3 trillion yen, or $38 billion, a year.

But in recent years, the hotels have attracted the Japanese mafia, big players in the real estate market.

Mr. Mijatovic, Alchemy’s chief executive, said he had passed along a report that Kato had links to organized crime to CarVal and to law enforcement authorities. CarVal said the report, commissioned by Alchemy and prepared by Kroll Advisory Solutions, a global corporate investigations and risk consulting company, lacked credibility.

The report suggests that the Yamaguchi-gumi, Japan’s largest crime syndicate, has made a direct investment of 30 million yen in Kato Pleasure.

Mr. Mijatovic said his lawyers met Monday with the Tokyo Metropolitan Police to discuss information about Kato. Police officials declined to comment on whether they had held such a meeting.

Japan has recently strengthened its laws against doing business with organized crime. The United States Treasury has banned transactions between Americans and Yamaguchi-gumi.

The Kroll report also says Kato, a big company in the love hotel industry, is known for poor working conditions, including overtime work without pay. Takeshi Okubo, a 57-year-old cleaner at a hotel operated by Kato Pleasure in Osaka and a member of a local union, said labor violations were rampant, including unpaid overtime.

Ms. Folkman said the Kroll report and Alchemy had misrepresented Kato Pleasure’s business. CarVal’s legal team found the Kroll memo “vague and filled with innuendo,” she wrote.

She noted that Orix, a major financial services company in Japan, had brokered the sale. CarVal conducted its own research on Kato, she added, and concluded that it was a large, respected hospitality provider in Japan. Kroll declined to comment.

A separate, independent report by Teikoku Databank, a well-known credit research firm, previously cast doubt on Kato Pleasure’s business. The report, dated October 2011, said Kato Pleasure had an account with one small credit union in Osaka but appeared to have none at a major Japanese financial organization. That is generally a rarity for an established business in Japan and can be one sign of mafia ties, according to Hitoshi Suzuki, a lawyer who heads the anti-organized crime committee of the Daiichi Tokyo Bar Association. He cautioned that he was not familiar with the specifics of Kato Pleasure’s operations.

The report said Kato Pleasure had booked an operating loss of 9.2 million yen, or $118,000 in the early months of 2011. As a credit rating, the firm gave Kato Pleasure a failing grade of 39 points out of a possible 100.

An official at Kato Pleasure’s headquarters in Tokyo, who identified himself only as Kawamoto, said on Monday that the company had “absolutely no links” with the Japanese mafia. He called the sale of the hotels “entirely valid” and said it intended to proceed “without a fuss.” When a reporter tried to ask more questions, he hung up. Further calls to the company’s main number went unanswered on Monday evening.

Katsuyuki Suezumi, an official in Osaka at the leisure hotels department of Orix, which brokered the sale, said he was not authorized to comment on the deal. A list of questions sent to Orix headquarters in Tokyo was not answered on Monday. 

http://www.nytimes.com/2012/10/02/business/global/conflict-in-cargill-sale-of-love-hotel-in-japan.html?ref=business