Photo/IllutrationAn L0 Series maglev train hits 500 kph during a test run in Yamanashi Prefecture. (Asahi Shimbun file phto)

  • Photo/Illustraion

Two "super general contractors" admitted in court July 10 to bid-rigging for contracts in a 9 trillion yen ($81 billion) project to build a super-fast maglev train line that will connect Tokyo and central Japan.

Obayashi Corp. and Shimizu Corp. pleaded guilty as corporate entities to unfair business practices and violating the Anti-Monopoly Law as proceedings got under way at the Tokyo District Court.

Obayashi and Shimizu were indicted in March, along with Taisei Corp. and Kajima Corp., as well as executives from Taisei and Kajima.

The court heard how executives of the four companies would meet at restaurants in Tokyo's Shinjuku Ward and elsewhere to discuss how to carve up the projects.

In their opening statement, prosecutors contended that the four contractors colluded to maximize their profits after learning that operator Central Japan Railway Co. (JR Tokai) was aiming to drastically reduce construction costs.

As the three senior executives of Obayashi and Shimizu admitted to the bid-rigging and showed their willingness to cooperate in investigations, prosecutors did not indict them.

Takashi Okawa, 67, a former managing executive officer at Taisei Corp., and Ichiro Osawa, 61, a department head at Kajima Corp. in charge of the maglev project, were indicted on the same charges but denied the accusations. They are currently under pretrial procedures to determine points of contention.

According to prosecutors, the four companies had been gathering information about sections of the maglev line work since 2008 when the government instructed JR Tokai to flesh out details of the massive project.

The companies were particularly keen to win orders for the construction work in the capital's Shinagawa Station, the planned starting point for the maglev train line, and Nagoya Station in Aichi Prefecture.

They became antsy when JR made clear it would open the project to bidding to ensure fair competition and lower costs.

By late 2013, Taisei’s Okawa and Kajima’s Osawa started discussing how to divvy up specific allotments of contracts for Shinagawa and Nagoya stations among the four companies.

In 2014, Osawa gained the consent of Obayashi's former executive vice president to collude on the project.

After April 2014, Okawa, Osawa and his contact at Obayashi met once a month at restaurants to discuss money matters.

Okawa and Osawa created a list of maglev line sections that their companies wanted to win orders for. The four constructors tried to divvy up the contracts for Shinagawa and Nagoya stations so that they all had an equal share.

Prosecutors pointed out that the Obayashi executive vice president enticed a senior managing officer at Shimizu to be part of the collusion process, complaining that his company was "making a nuisance of itself by acting arbitrarily.”

After the February 2015 agreement to collude on bid-rigging, Taisei and Kajima intentionally proposed higher bids than Obayashi and Shimizu with the aim of letting those two companies win construction contracts for the Shinagawa Station portion of the project.

JR Tokai asked Obayashi to participate in the bidding for construction of Nagoya Station because it feared costs remained artificially high due to bid-rigging.

After discussing the matter with Taisei, Obayashi presented a cost estimate that was higher than what JR Tokai was willing to accept.

JR Tokai demanded the two constructors to submit lower estimates in line with the market price for concrete.

In response, Obayashi reduced its bid, while Taisei did not, which meant Obayashi won the order.

(This article was compiled from reports by Takaya Kobayashi and Wataru Netsu.)