Photo/Illutration The head office of Iwaki Shinkumi Ltd. in Iwaki, Fukushima Prefecture, on May 7 (Nobuya Sawa)

WAKI, Fukushima Prefecture--A credit union here engulfed in a fraudulent-loan scandal funneled funds to entities linked to right-wing political groups to bring an end to their public protests, multiple sources said.

Iwaki Shinkumi Ltd. was found to have extended 24.7 billion ($161 million) in loans to financially distressed borrowers, who then returned the funds disguised as repayments.

The credit union wanted to avoid having the outstanding loans classified as nonperforming.

However, part of the overall amount was diverted to halt street protests over alleged fraudulent activities at the credit union, the Financial Services Agency said on Oct. 31.

The FSA issued an administrative penalty to the credit union under the Banking Law, ordering improvements in operations and a suspension of extending loans to new customers for one month.

The FSA also told the credit union to severe its transactions with such entities.

According to the agency, a former executive of the credit union said during interviews that funds were repeatedly provided to such entities in response to their unjust demands from as early as around 1992.

However, the credit union’s management had submitted false reports to the agency to conceal its ties with such entities.

Jiro Ejiri, the former union chairman who resigned in November 2024 after the scandal broke, told reporters on Oct. 29, “I have nothing to say.”

The credit union also declined to comment on the latest allegations.

Iwaki Shinkumi in January 2012 received 20 billion yen in public funds for post-disaster reconstruction efforts following the 2011 Great East Japan Earthquake and tsunami.

In May this year, The Asahi Shimbun reported that the credit union had issued unauthorized loans by using accounts that were opened under the names of depositors without their consent.

A third-party committee established by the union confirmed 1,293 cases of “unauthorized proxy loans” since 2004, totaling around 24.7 billion yen.

While most of the money was recycled as repayments, the committee noted that between 850 million and 1 billion had flowed externally with no clear record of use.

The committee urged the union to investigate further.

According to several sources, suspicions emerged in the follow-up investigations that some of this money was used to quell the right-wing protest activities.

As early as the 2000s, multiple right-wing political groups staged loudspeaker protests near the credit union’s headquarters and executives’ homes, accusing the institution of fraudulent lending.

Although the credit union sought court injunctions to stop the protests, it is believed to have provided funds to the entities connected to these groups in exchange for an end to the demonstrations.

In March this year, the Shinkumi Federation Bank, the national umbrella organization for credit unions, invested 5 billion yen to strengthen Iwaki Shinkumi’s financial base for repayment.

Following the exposure of the fraudulent loans, the Tohoku Local Finance Bureau issued a business improvement order at the end of May.

Since June, the FSA has been conducting on-site inspections.

The credit union at the end of June established a special committee comprising lawyers and certified public accountants to investigate the missing funds and other irregularities.

The investigation is ongoing.

(This article was written by Nobuya Sawa, senior staff writer, Tabito Fukutomi and Wataru Netsu.)

 

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