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The war for bad-loan recovery has started

Extortionists turned into squatters

Yakuza, or Japanese gangsters, who used to threaten tenants and inhabitants with eviction at an unscrupulous real estate broker's request, have started to act as illegal occupants.

They hang out their mobster's signboard or occupy a room in a building which is mortgaged in order to interfere with an auction by a bank. Few want to bid for a property where yakuza reside, no matter how favorable conditions may be. If someone does bid, they must be yakuza themselves or associates unlawfully occupying the building. The illegal occupants can buy the property at a super-low price, unless some other person offers a bid. In any case, a proper auction cannot be organized once yakuza get possession.

But, for whom and for what reason did gangsters start to occupy property? There are many types of illegal occupants; thus they must be considered on a case-by-case basis. If there are 100 cases, there are 100 distinctive backgrounds.

A simple example may be found where a debtor who is not able to make a loan repayment to a bank asks mobsters to occupy the collateral property for the purpose of impeding the sell-off. A debtor, for example, who runs a sushi bar on the first floor of a building, will be forced to shut his restaurant if the property passes into someone else's possession. It will be a total loss for him, and thus wants to stop the auction by all means. In addition, it was the bank who advised him in the first place that constructing an office building on his land would mean tax savings and persistently offered financing to him, while now referring to the auction in front of him. The sushi bar owner cannot put up with it, and it is no wonder that he attempts to stop it by threat of force.

Bad loans are business opportunities

Such cases, in fact, are small-scale harassment.

For example, there was a case where mobsters were arrested in Fukuoka due to squatting in a building and interference with an auction. The gangsters' intention was to buy it cheaply and resell it to a third party for a big profit. In this case, surprisingly the gangsters had already obtained a purchaser before the property had been acquired by the bid. If these techniques are used by gangsters, auctions for recovering bad loans will bring a mound of treasures to them.

"Some debtors, who cannot pay off their loans to a bank, employ gangsters as their representatives and have them negotiate with bank officials, while having them reside in a room on the property that is mortgaged so as to interfere with the auction. They are disgusted with the bank's way of doing things. However, the debtors should realize the fact that they will be robbed completely by mobsters once they deal with them," a top manager of a large city bank noted.

Gangsters are not only interfering with auctions but also building a structure where bad loans of banks means business opportunities for mobsters.

Exposing past illegal deeds

"People, who appeared to be gangsters at first glance began to come to our branch frequently," a manager of a large city bank, who worked as the branch manager in Yokohama until June 1996, admits frankly.

"Most of them said that they came on behalf of people who got financing from our bank. Most of them left when we asked them to come back again with their clients. However, some clients do leave negotiating with the bank to gangsters. It is often that yakuza get extraordinary commissions for services to their clients. They outrageously demanded and threatened that we should withdraw the auction or cancel the debt."

They always bring up past close relations between the debtor and the bank, threatening to "expose" that the debtor invited the ex-branch manager to travel abroad during the times of the "bubble economy," that the manager gave a rebate to the debtor in exchange for financing, or that the bank relied heavily on its debtors during those days. There are three types of threats: exposing the ex-manager's deed to the headquarters of the bank, the Ministry of Finance, or the mass media," the former manager explained. There are even those mobsters who claim to have close contact with influential politicians.

Life more precious than collecting debts

The large city banks claim to be ready to handle these situations, but there is a big gap between the reality and the ideal.

"The manager of the Sumitomo Bank Nagoya branch was shot to death in his apartment and the Hanwa Bank's vice president also was shot and killed when he got into his car for a commute. Though we are told bad-debt collection is necessary, we cannot risk our lives. We are not paid enough to confront yakuza," a branch office's deputy manager at a city bank said.

The credit-managing organization for jusen, housing loan companies, has claimed, "We will start to collect debts from October." But to what extent do the members of this body understand the realities in which expert bankers with various experiences have difficulties in collecting debts at the risk of their lives? Action to recover bad loans in Japan has just started.

The chaos is yet to come.

Takarabe Seiichi was born in Tokyo in 1956. He is a freelance journalist. He graduated from the Law Department of Keio University and joined Nomura Securities. After leaving Nomura, he worked for a publishing company. His books include "Japanese-style Virtual Management" and "Darkness of Jusen."


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