Photo/IllutrationDMX Technologies Group Ltd.'s office in Hong Kong (Kenichi Kimura)

Among the documents found in the Paradise Papers is one related to a subsidiary of KDDI Corp. that shows the resistance put up by Hong Kong-based executives when the Japanese communications company tried to change auditing firms.

KDDI admitted to illegal accounting practices at the Hong Kong unit in March 2015, but the new document provides additional details about how executives at the Hong Kong subsidiary--DMX Technologies Group Ltd.--used various excuses apparently to conceal the improper accounting practices at their company.

DMX is listed on the Singapore Stock Exchange, but it is registered in Bermuda.

According to documents released by KDDI and DMX, KDDI acquired a majority stake in the company in 2009. The change in auditing firms was finally pushed through in April 2014. The new U.S. auditing firm conducted an audit for the financial reports of the fiscal year ending in December 2014 and pointed out a delay in the receipt of money for the sale of telecommunications equipment to a Chinese company as well as the possibility of fake transactions.

In February 2015, two DMX executives were arrested by Hong Kong police.

The executives used a company established in the British Virgin Islands to serve as an intermediary for those transactions.

After KDDI announced the accounting discrepancy in March 2015, it recorded a special loss of 33.7 billion yen ($295 million) in May 2015.

One document in the Paradise Papers contains the minutes of the Audit Committee meeting for DMX that was held in November 2012.

In those minutes, an executive sent from KDDI explains a policy change within the KDDI group to have all group companies use the same auditing company. One reason given for the proposed change was to ensure smoother communications within the group.

The minutes go on to describe an explanation that the new auditors would charge fees that were 10 percent lower than those charged by the present auditing firm.

However, a number of DMX executives raised objections to the change, with one saying that a lower fee was not a good reason for changing auditing firms. Others raised concerns that making the switch could affect DMX’s stock price, which would, in turn, hurt KDDI’s corporate performance.

The minutes go on to show that no decision about the change was made at the meeting.

It would be close to 18 months later before the auditing firm was finally changed.

KDDI officials admitted that the company’s oversight of its subsidiary was insufficient. The officials said the company is unaware of the motives or purposes of the improper accounting practices because it could not question former executives.

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Visit The Asahi Shimbun's special website on the Paradise Papers for videos, photos and graphics on how journalists dug into the more than 13 million documents leaked from Bermuda and elsewhere to uncover shady transactions through tax havens.