Suckered

Recently, we were near Gotanda Station on the Yamanote Line and decided to check out an abandoned property that’s been in the news lately. This piece of land, which still has an old-style Japanese inn (ryokan) sitting on it unused, is about five minutes by foot from the station, overgrown with weeds and other vegetation. It covers 600 tsubo, or almost 2,000 square meters, and thus is worth a lot of money. Many developers would love to get their hands on it. One, Sekisui House, thought it had. Almost 2 years ago it signed a contract with a company that claimed it represented the owners, and Sekisui transferred ¥6.3 billion to the company before finding out that the company did not represent the real owners. Since then there have been arrests and stories in the media about this particular instance of jimenshi (real estate swindle), but so far the money itself has not been recovered, and some of the main players may have gotten away.

In the past few months, the story seems to have died down. When we walked around the property, which is surrounded by a deteriorating mortar wall and a makeshift fence, we came upon a dozen or more people assembled around a standing ashtray, smoking, on the street that lies between the property and the river, at the base of a bridge that crosses the river. At first we thought it was a strange place to put an ashtray since there weren’t any office buildings right there. These days, many companies don’t allow smoking in their offices and so employees who do smoke have to go outside. But then we realized that these people were not workers at nearby companies. Most seemed to be reporters who were hanging around just in case something happened at the property. Obviously, the story is not dead, though we had to wonder what the reporters were actually waiting for.

For sure, the scandal isn’t over, but so much has transpired since the swindle first came to light that it’s difficult keeping up with the various threads. The best rundown of the case we’ve seen so far was provided by Gendai Business last August, and since then, it seems, progress has slowed to a crawl. In a nutshell, the ryokan had been in operation since the end of the war, and eventually came into the possession of a certain Ms. S in 1960 by dint of inheritance. There were no outstanding debts, no strings attached. Her title on the property was clear and unchallenged, which meant if she ever wanted to sell the property she didn’t have to seek permission from any other parties. Over the years, many developers have tried to contact her and buy the piece of land, and she always said no. She had no intention of selling. The ryokan remained in business with a full kitchen and housekeeping staff.

Eventually, Ms. S fell ill, and around 2012 she told the sanitation agency, which regulates restaurants and inns, that she was leaving the local hoteliers association. The news spurred even greater interest in the land, since potential buyers thought Ms. S would now be ready to sell, and when Tokyo won the right to host the 2020 Olympics, interest became even more intense, since Gotanda is infamously lacking in accommodations. The real estate industry at the time thought the property could fetch as much as ¥10 billion.

Then, in April 2017, the land registration for the property was changed to “purchase reservation” status, thus indicating that a sales deal was going down. Because land registrations are public, the media discovered that Sekisui House, a developer based in Osaka, now was registered as the purchaser of the property. Moreover, it was somehow leaked that they were buying the land for ¥7 billion, a huge bargain, though the sale had yet to be finalized.

In June, however, the situation suddenly shifted 180 degrees, when it was reported that title for the property had been transferred to two men who, it turned out, were Ms. S’s brothers. Apparently, Ms. S had died after the supposed deal had been arranged with Sekisui House. How could the Sekisui negotiations have proceeded without these two men’s knowledge? According to an expert interviewed by Gendai, the Justice Ministry, which oversees land registration, had recognized that there were problems with the Sekisui deal, and the registration office accepted the two men’s application as title holders when they came to the office with the proper documents indicating the death of Ms. S and their relationship with her. Consequently, Sekisui’s purchase reservation was voided, even though they had already paid ¥6.3 billion of the total ¥7 billion.

More interestingly, Ms. S’s death was totally coincidental to the matter, since, based on available intelligence, she knew nothing about the fraudulent deal with Sekisui. In fact, if she hadn’t died and the title hadn’t been transferred to her brothers, thus bringing the matter to the attention of the Justice Ministry, it might have been months before the swindle became known. In that case, the perpetrators might have gotten away with it completely, but as it happens, since the deal was not finalized, many of the persons involved were caught and arrested, though several remain at large.

What’s funny about the case is how hard Sekisui House was hit. After all, they lost ¥5.5 billion (they did end up recouping part of the ¥6.3 billion they had eventually transferred) without ever having signed a final contract for the land. Keep in mind that Sekisui enjoyed about ¥2 trillion in sales during the year the deal went down, so that loss isn’t going to make a big dent in their bottom line, but the revelation was so humiliating that the president was forced to resign and, reportedly, at least one staff member committed suicide. On the other side of the deal, 14 people were arrested, with four eventually being indicted for forgery and illegal land registration.

As Isao Mori, who has published books about jimenshi and wrote the article for Gendai, explained, the kind of swindle the fraudsters carried out is not something new. It’s been done before, a number of times. The reason a big company like Sekisui would fall for it was pure momentum. So many companies have been trying to get their hands on that land for so long that they almost willfully suspended disbelief when a too-good-to-be-true deal came their way. They grabbed at it like a starving man for a piece of bread. It’s what the fraudsters count on. If Sekisui hadn’t made a bid, APA Hotel might have fallen into the trap, since they had expressed interest as well and had already been swindled by a similar jimenshi scheme orchestrated by one of the men involved in the Gotanda fraud, though APA managed to get out of it with only minor damage.

In August 2013, APA became interested in a plot of land located about a minute from Tameike Sanno Station on the Ginza subway line. At the time it was occupied by a parking lot. A group of swindlers pretending to be representatives of the family that owned the land approached APA, which was very excited about obtaining it and gave the company a retainer of ¥1.26 billion. However, the company that operated the parking lot got wind of the deal through a customer and rang the alarm, so to speak. The owner of the land had recently died, and that man’s management company, which also owned a famous restaurant in Ginza, took over title of the land in Tameike Sanno. The late owner had two sons, and the swindlers hired two men to impersonate these sons when negotiating with APA. In reality the two sons, already very old at the time, were living in care facilities, meaning it would have been difficult for them to find out and understand that someone was impersonating them. In addition to the two octogenarian actors, the swindlers also had notaries and lawyers at their disposal. Eventually, the fraud was discovered, and the mastermind is now in jail, though it’s suspected that he also masterminded the Gotanda swindle. The m.o. is startlingly similar. For one thing, the “talent agent” who hired the actors to impersonate the brothers in the Tameike Sanno swindle also hired talent for the Gotanda job.

The amount of planning in both cases (as well as one more in Mukojima believed carried out by the same group) is impressive, though, in the end, since most of the principals were caught, not impressive enough. The fact that the real estate industry is so gullible for such deals is telling. This week, one of the masterminds was extradicted back to Japan from the Philippines, but the media still hasn’t said anything about that missing ¥5.5 billion or whether it’s gone for good. It’s obviously not the end of the story, nor to swindles like this when you have expensive properties lying around that are owned by people who may not have the presence of mind to dispose of it properly.

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