CHAPTER TWO

From paperwork to fieldwork

Paperwork can tell you a lot about a company, but it’s two dimensional. Most of the time, you’re going to have to explore in three dimensions—that means turning off your computer, getting off your ass, and actually going to where the company is located. I’m paraphrasing something I once heard, but due diligence isn’t asking if it’s raining and then listening to two opposing views and writing it up in a report and calling it a day. It’s looking out the window, leaving the office, and seeing whether you get wet or not. Then you know.

The day after meeting with the client, I decided to check out the Nakatomi Holdings offices. The Tokyo Metropolitan Police had drawn up a list of over 1,000 yakuza front companies in the city, including real estate agencies, construction subcontractors, talent agencies, stockbrokers, private detective firms, auditors, importers, and even a bakery. Nakatomi wasn’t on that list. Not yet.

The most recent corporate registration for the company had them located in an office building in Roppongi, which wasn’t unusual per se. Japan has a number of business districts where certain firms tend to congregate, and Roppongi was a hotbed of foreign investors and funds.

Lehman Brothers Japan had their offices in Roppongi Hills, which was the hotspot for nouveau riche venture capital. It also contained a giant shopping mall and culture center. The Yamaguchi-gumi, Goto-gumi, and Inagawa-kai Tsukumasa-ikka had been hired somewhere down the development chain to terrorize all the tenants that used to live in the area until they vacated the premises. Many sold their property to the real estate behemoth Mori Building, or agreed to move into the low-rent condominiums that had been designated as a classy ghetto for former residents.

Roppongi used to be called “high-touch town,” and no one was quite sure what that referred to, but beneath the glitter was a dark stream of predatory vice and sleaze. So, yes, of course, it wasn’t surprising that Lehman Brothers and Goldman Sachs had offices in the area. It wasn’t surprising that Nakatomi Holdings would be there, either.

Just a note here. At that time, Lehman Brothers had not yet been infiltrated by a lawyer who had a history of working for Yamaguchi-gumi front companies. That would cost them $350 million in 2008. But that’s the price of not doing your due diligence. When Tony, aka Action, publishes his book in 2024, you’ll know the whole story.

One thing you learn to look for when trying to determine the legitimacy of a company is what I like to call “territory incongruence”. Is the building located in an area where you would expect to find such a business? For example, Nerima-ku is an almost rural and residential area of Tokyo. If a company offering investment-consulting services were located there, that would ring alarm bells.

One of the most important and obvious things you do when checking out a dodgy company is to go to where the company is located. Footwork is almost always the core of any detective work. Japanese police, especially homicide cops, have a saying for this: “The scene of the crime, one hundred times.” The meaning is obvious—go back to where the crime took place again and again, because the most important clues and evidence to break the case are probably there.

The offices of Nakatomi Holdings were located on the top floor of an office building three minutes from Roppongi Station. The building was nine stories tall with a basement. I showed up wearing the uniform of a famous Japanese mail-delivery service with a package in my hand. I kind of looked fat in the blue-and-white shirt, but it wasn’t a fashion show, it was work. I had a dark navy baseball cap on and was wearing black-rimmed glasses that did nothing but keep out UV rays and looked very nerdy. They also made my face a little harder to remember, and screwed with security cameras. Although nothing could really hide my giant Tengu nose, the baseball cap helped.

I did one more thing before I walked into the building. I took a photo of myself in front of the building, and I sent it as an attachment to an email to Michiel Brandt, who was my research assistant, and Saigo. If something went wrong, there would be at least two people who knew where I was, and that was a bargaining chip.

Michiel was the person I’d trust to contact the police if need be. She knew the cops I was friendly with and trusted, and they’d respond to her if she contacted them asking for help.

Saigo was the muscle. He looked like an anime version of Frankenstein’s monster with gray skin and a black suit. Back in the day, he’d been a legend in the underworld: unpredictable, unexpected, and always leaving a tremendous amount of damage in his wake. Tsunami, indeed. When I was nosing around someplace spooky or dangerous, he was good to have around. He himself was an encyclopedia of underworld lore and knowledge. He couldn’t be with me on this day — he had other work, and I didn’t ask what that was. So I needed to keep a low profile.

If you are going to walk in and out of buildings in Tokyo looking for clues, it is ideal to be invisible; dressing as a delivery person was the second-best thing. Nobody noticed you, most of the time.

There was a large security camera above the front door that had rusty rivets securing it, but once I walked inside there was no security camera in the room to the left where the mailboxes were located.

Mailboxes could tell you a lot about a business. Some of the mailboxes had the company name embossed onto the metal, giving a sense of gravitas to the firm’s presence in the place. Nakatomi Holdings had their name in block letters and printed on a yellow label that was plastered to the outside of their mailbox, one of many in the rows of mailboxes. It looked like it had been made with the TEPRA label maker, and there appeared to be remnants of labels that had been plastered there before, giving the whole mailbox a kind of messy and thrown-together ambience. There appeared to be a bunch of pamphlets and presentation booklets crammed into the mailbox, and at least one had fallen on the floor. While stealing mail is a crime, it’s not a crime to pick things off the floor. Being a good Samaritan, I pulled out the overstuffed packet and helped clear some space in the mailbox.

While I was putting things in order, I used my yellow flip-top phone with its own camera to take pictures of the outside of all the envelopes. In 2006, Japanese cellphones were technological marvels, and the iPhone wasn’t even a word. Japanese telecommunications giant NTT Docomo released a mobile internet surfing service called i-mode in 1999 that was accessed by cellphones that were way advanced beyond their time. While Japanese people were playing games, surfing the web, and even watching television on sleek flip phones, my counterparts in the United States were still making calls and punching out texts on tiny screens.

However, Japanese phones had their faults.

Almost all Japanese phones are equipped with a shutter sound so that when you take a picture, there is an audible and loud click that is particularly distressing when you’re trying not to be noticed. There’s a reason for that. Japan has always had a problem with perverts, aka hentai, who derive a particular glee from snapping photos of naked women or women’s panties.

Just the sight of women’s panties sends some men into ecstasy here. Go figure. There’s even a word, panchira, “a flash of panties,” to reference the perverse thrill that glimpse may give to some people. As a reporter, I had written several stories about panty thieves who had amassed massive collections, sometimes sorted by color, size, and lace or non-lace. Men who didn’t have the balls to steal panties outright seemed to be happy with up-skirt photos. The old-fashioned perverts went for naked female photos. They soon made “camera phone” (the predecessor to smartphones) a key weapon in their arsenals. Camera phones were deployed to snap up-skirt photos of schoolgirls’ underwear, to take sneak photographs of women in bathroom stalls, and, of course, nude photos at Japan’s hot springs and public baths. After a B-grade TV celebrity and comedian was caught videotaping the underwear of a woman on the Tokyo subway in 2000, telecommunications manufacturers began including a built-in shutter sound that goes off whenever a photo is taken. That had some impact on cutting down on sneak photography. It also made wielding a phone to snap a picture incognito a pain in the ass. Many digital cameras were also equipped with the same sound function; it’s useful to know when you’ve snapped a picture and hear the nostalgic mechanical sound of a shutter clicking, but it’s not helpful in my line of work. I heard there was a place in Akihabara that could kill the shutter sound for a price, but it might have been an urban legend.

I knew it would be quieter if I jotted down the addresses by hand in my notebook, but my handwriting both in Japanese and English is terrible, and I needed to be sure that I had the correct addresses. Photographs are usually better. I just snapped away, hoping no one was around.

I captured my photos, and headed to the elevator. I wanted to see what was on the top floor and to get a sense of the Nakatomi offices. The elevator also had a security camera inside. I couldn’t tell whether it was working.

I got off the elevator looking at the address on my package, which was one building off. I had intentionally written a wrong address, and went down the hallways. The Nakatomi office was closed, although there was a nice sign on the solid-metal door. There was a buzzer to the side with an intercom. There was also a camera above the door—very new—and different from the cameras in the rest of the building. The rivets were shiny, and it seemed like a state-of-the-art security camera. It indicated an unusual level of paranoia for a small business, and I made a mental note of it. The door to the office had another mailbox built into it, close to the bottom, I supposed it was for newspapers, periodicals, or maybe a dropbox of some kind. There was a large slot to drop in publications or printed materials, but not large enough for my hand to get in and pull anything out. I had enough for the day, and left. This was a start.

When I got back home, which was a shared house in Nishi-Azabu, I made myself a cup of coffee in the kitchen. I kicked back on my futon and started reading through the materials I’d collected.

The strange alchemy of due diligence at the time was far from an exact science. There was no manual and almost no public sources available to utilize, but there were things that I always checked. You looked for contradictions—contradictions inherent when something (or someone) is not what they claim to be. In order to do this, you have to know what the entity claims to be doing in the first place. I scoured the company’s promotional pamphlet for grains of information.

I imagined that my client also had a copy of the pamphlet and it would have been nice to have had it from the start. I had no illusions of friendship or camaraderie with the client, but it would have been in their best interests and made my job easier if they always told me everything they knew when I took the job. The nature of a client was to tell you as little as possible to see what you could dig up or to follow some meaningless “need-to-know-basis” hoarding of information policy. The “need-to-know-basis” way of doing business isn’t always a good one. If you’re an investigator, the more you know, the better you can do your job, and you don’t know what you’re going to need to know until way later in the game.

Nakatomi emphasized that it had been established in 1970, showing that it had a long history. However, as I peeled back the corporate registrations, working from the most recent back to the original documents, and followed the company’s evolution over time, that founding date became meaningless. The original company had almost nothing to do with the entity I was looking at now.

Nakatomi Holdings KK was allegedly founded in 1970, according to its original website, which had been closed down. The presentation materials noted: “Traditionally, the [company’s] activities were focused on the purchase, sale, leasing, management and utilization of real estate, as well as management consulting services and later in the area of hedge fund research and manager selection for institutional investors.”

Well, not according to its closed company registration. It was true that the company was established in 1970, on July 1. However, the company was first called Ryukawa Tosō and registered in Hirosaki City in the Aomori prefecture—one of the northernmost parts of Honshu, the main island of Japan. I like to think of it as the Siberia of Japan. When I was working for the Yomiuri Shimbun, it was rumored that if you really fucked up, you would be exiled to the Aomori bureau for a few years.

Yes, this financial goliath was originally in the house- and office-painting business in the North Pole of Japan. Tosō means “painting.” If you saw a window and you wanted to paint it black, these were the people to go to.

The company was renamed Midori Books on October 29, 1990, and moved to Shizuoka City in the Shizuoka prefecture. According to its corporate registration, Midori Books sold books retail and didn’t do much else. Its board members were all Japanese. Okay, so how does a painting company turned bookseller become a consulting firm?

The company pamphlet went on to say:

Ten years ago, the current senior partners began a collaboration with the company in international private equity investments and hedge funds as well … As the collaboration expanded, the companies merged in 2002, and the company activities then additionally included a selection of investment vehicles and private banking referrals.

Despite those statements, there was no mention of the alleged merger in 2002 on the company registration.

The pamphlet noted that “in 2005, the original owners of the company retired and the current senior partners took over the company, completing the process in 2006.”

This sentence appears somewhat true—according to the company registration on April 11, 2006, all the Japanese board members quit their positions, and the company was renamed Nakatomi Holdings. Then the current Nakatomi board members assumed their positions on the same day. Its business objectives also changed on that day, and the company suddenly went from listing its core businesses as “sales of books” to “real estate sales, purchase, exchange, leasing and management and management consulting.”

The company moved to their current office on May 22, 2006. However, little information was uncovered on the company, except from its website and the company’s presentation sheet.

According to its (old) website, preserved in an archive, the company allegedly worked primarily with “non-Japanese domiciled institutional qualified investors” and provided “consulting services on investments in Japan. The company specializes in financial institutions’ advisory and secondary transactions with noted hedge funds, private equity funds and direct and co-investments.”

The company’s explanation of what it did in both English and Japanese made little sense but did include a handful of corporate buzzwords that seemed meaningful.

They did have the business buzzword-laden spiel down well.

“Using its worldwide network of private banks, family offices and asset managers, [Nakatomi Holdings] expanded into advising on strategic expansion strategies of these firms, assisting in facilitating M&A and alliance formations, particularly into the Asian and European markets by financial institutions.” 

However, there was no information uncovered on the company’s clients’ names. I looked through G-Search and Nikkei Navi, the two biggest newspaper and magazine article databases in Japan, and came up with zilch. I could find no media coverage of the company from internet and database searches.

I did one more thing. I looked at the companies that had been sending mail to the firm, and checked their addresses against the lists I had of yakuza front companies in Tokyo and beyond. It was a crude system that I had working. It was not a fast system, and it had flaws. In Japan, addresses are sometimes written out with Japanese characters and western numbers, or else completely in Japanese characters, even for the numbers and blocks that make up an address. This meant that sometimes you had to enter variations of the same address to get a hit.

One firm that had sent them an invoice showed up in my search. When I punched the name and address into my database, the listed office address was also the office of the Yamaguchi-gumi Mio-gumi in Tokyo. The Yamaguchi-gumi Mio-gumi, also known as the Yamaguchi-gumi Goryo-kai, was responsible for a billion-dollar loan-sharking operation that had even laundered funds in Las Vegas and Switzerland. And Nakatomi Holdings had been doing business with them. I didn’t think that was a coincidence.

All of this led me back to the same question over and over. How was it that a painting company in the Aomori prefecture, the North Pole of Japan, ended up being a financial powerhouse? I imagined the answers would be in Aomori. I was going to need to go there. The best way to really figure out what was happening now was to go back to the start.

I called the client and requested more expense money to make the trip after I gave them an update. They agreed. I also decided to call up Toshiro Igari, who had served in Aomori years back.

I went by his office and had a cup of coffee, and asked him how much of a foothold the Yamaguchi-gumi had in Hirosaki City, because it was already clear to me that they were involved to some extent. Igari, the ever-well-coiffed bulldog, informed me that he remembered the Yamaguchi-gumi as being very weak in that area.

“Jake, I was there in 1983, that’s a while back,” he told me. “At the time, there was the Umeva-ikka and the Kyokuto-kai Sato-kai, and they were in the middle of a bloody gang war. Right out of the movies. The Umeya-ikka ended up getting sucked up into the Inagawa-kai, and these days the Inagawa-kai are pretty much under the thumb of the Yamaguchi-gumi. I can’t remember what happened to the Sato-kai.”

He gave me a brief colorful history of the gang wars there and taught me something I didn’t know. The Kyokuto-kai took their name from a private detective agency that had been run by their founder. I thought that might make a nice TV series someday: Yakuza PI. Like Magnum PI, but with tattooed heroes who were missing fingers instead of Tom Selleck and his iconic 1980s mustache. It wasn’t unusual for the yakuza to run private detective agencies—after all, information is money—but I didn’t know there was a major mob group that took their name from the front operation.

I explained the case to him so far, and he suggested that the people behind Nakatomi Holdings were probably piggy-backing. “Piggy-backing,” he explained, “is when you convince someone of your legitimacy by using a name that they are familiar with. It’s like a dubious investment fund taking the name of Sumitomo, Fuji, or even Mitsui. No one really owns the right to those names, so there is no copyright issue, but since people know the names, it gives them a sense of security.”

He didn’t have anything else to add after that, but he did give me the name of a cop with the Aomori prefectural police who he said would be helpful. Igari said he would make an introduction. I was grateful for the help. It would be nice to head up there with at least one person who might talk to me.

I was a little hesitant about going to Aomori; I didn’t know anyone there, and Saigo wasn’t going to come with me. He might have if I had paid for the ticket, but I was pretty sure I could handle this one on my own.

Aomori was considered a hardship post for Yomiuri exiles for good reason. The winters were crushingly cold, and Aomori City gets about 26 feet—or eight meters—of snow each year. I was just glad that it wasn’t winter.