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More dubious practices?

March 6, 2012

Shenanigans at TEPCO subsidiary led to higher electricity rates: investigation




Tokyo Electric Power Co. (TEPCO) raised electricity rates after one of its subsidiaries offloaded an assignment from the utility -- and its projected profits -- onto a third-party firm, a Tokyo Metropolitan Government investigation has revealed.

The subsidiary was tasked with operating a high-class restaurant for TEPCO employees, and apparently forked the whole business over to an unrelated company, according to the results of the investigation released on March 5.

"TEPCO has been conducting similar transactions with other subsidiaries systematically and added the extra costs to electricity rates," Tokyo Vice Gov. Naoki Inose stated as the results were unveiled. The Tokyo government furthermore plans to ask Economy, Trade and Industry Minister Yukio Edano to investigate dubious business practices at TEPCO subsidiaries.

According to the Tokyo Metropolitan Government, the TEPCO subsidiary in question is Tokyo Living Service Co., which has been running welfare-related business for TEPCO staff such as dormitories for single employees, travel firms, nursing-care facilities and nursery schools. The company, which has 1,000 employees, posted about 14 billion yen in sales for the 2010 business year.

"It is a source of employment for retired TEPCO employees, and 70 percent of its business comes from TEPCO," said a source close to the utility.

The restaurant TEPCO commissioned Tokyo Living to operate is the "Shibuya Toyu Club" -- a high-class restaurant open exclusively to TEPCO employees. But Tokyo Living is, in fact, believed to have left a third company run the restaurant, only taking a cut of the profits.

The Tokyo Metropolitan Government suspects that, as a result of the utility allowing Tokyo Living to make such deals, revenue TEPCO was supposed to get from the restaurant dropped substantially.

TEPCO scrapped the restaurant contract with Tokyo Living in May 2011, and the Shibuya Toyu Club is now operated by a different firm. TEPCO's public relations department has acknowledged such business practices at TEPCO and its subsidiary, adding, "We are planning to sell Tokyo Living. We will continue to review the ways in which transactions are made."

In related news, a government panel investigating management practices at the troubled utility has said in its own report that companies affiliated with TEPCO (including its subsidiaries) are profiting from deals with the firm.


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