An independent special audit committee established by TATERU Inc., a Tokyo-based real estate company listed on the First Section of the Tokyo Stock Exchange (TSE) has found that 31 of the company’s employees were involved in 350 cases of tampering with customer loan documents submitted to Saikyo Bank for apartment investment loans. Auditors announced on December 27th that the fraudulent activity started prior to the company’s listing on the Mothers Section of the TSE in 2015 and has been ongoing until this fall.
The fraud first came to light in September when a potential investor and client of TATERU Inc. (hereafter, TATERU) became suspicious when news of the Suruga Bank document forging scandal broke. This led him to contact Saikyo Bank directly about his application for an apartment investment loan. A review of his application found that the bank account balance shown on his loan application had been significantly inflated by an employee of TATERU, who had submitted the document on his behalf. The loan application and contract to purchase the property were both cancelled. TATERU admitted that its employee had committed fraud and appointed an independent special committee to investigate the extent of illicit activities by other employees.
The audit committee found that 31 employees had tampered with customer loan documents by altering the account balance shown on their clients’ online banking interface (screens) before submitting this documentation to the lender for underwriting. By dramatically inflating applicants’ savings account balances, these employees had hoped to make it easier for the applications to pass underwriting by the lender, which in almost all cases was Yamaguchi prefecture-based Saikyo Bank. The audit found that there were about 350 cases of document tampering, or about 15 percent of the apartment building investment contracts signed during the period.
Sales Quotas and Power Harassment
The investigative committee noted in its report that sales quotas were annually increased by 150 to 200 contracts per year. Managers of local sales offices faced severe power harassment if they turned in inadequate results. This environment was seen as creating pressure for employees to push forward deals that would not likely have closed without fraudulent intervention by TATERU employees.
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