Behind the Tokyo Olympics bribery scandal involving Dentsu, Hakuhodo and ADK

"Corruption has been rife in many Olympics as well as in World Cups. It's like an ancient plague," says Peter Humphrey, a former corporate fraud and corruption investigator in China who has worked for Kroll Associates, PwC and ChinaWhys.

"In certain countries with weak governance or a history of corruption we see bribery of the government by companies to win contracts to build venues and to provide services. There is also a problem with certain monied countries who splash out bribes to buy the votes of poorer IOC members to obtain the games. You can be sure some of that has happened in almost every Olympic bid, including Japan's."

From the moment Tokyo won the bid for 2020 Olympics from rivals Madrid and Istanbul in 2013, the Games have been shrouded in scandal. Sold as the ‘Recovery Games’, the 2020 Games were meant to be a shining opportunity to celebrate the nation’s revival from the 2011 earthquake and the subsequent nuclear disaster at Fukushima. Instead the event was cast by a pall of bid-rigging and mounting corruption allegations.

“Nations and companies who hand out largesse hope that no one finds out, or that controversies are forgotten when the Olympic circus comes to town—and public and media attention focuses on tales of sporting glory," says Mark Forbes, director of reputation at Icon Agency. "Usually, public memory is short-lived, and the passing of time erodes interest in corruption sagas."

Japan's late former PM Shinzo Abe, third from right, surrounded by Tokyo delegation members in 2013 after the city won the bid to host the 2020 Summer Games. (AFP/Getty Images)

One thing that will keep public memory stoked is the tenacity of Tokyo prosecutors in pursuing the role of Japan’s top three ad giants—Dentsu, ADK, and Hakuhodo—in this saga. Undoubtedly, this scrutiny will cast a shadow on efforts by another Japanese city, Sapporo, to become the host of the 2030 Winter Games.

Campaign Asia-Pacific has been following this news around the involvement of Tokyo’s top ad agencies. Here's an explainer on the widening graft probe.

Why are Dentsu, ADK and Hakuhodo under the scanner in the Tokyo 2020 probe?

Short answer: Suspected bid-rigging in 26 out of the total 56 Olympics and Paralympics events.

Explanation: As reported by Campaign last week, offices of Dentsu, Hakuhodo, ADK and Tokyu Agency, were searched in Tokyo by prosecutors and the Fair Trade Commission on suspicion that these firms rigged bids for the rights to manage test events for the Tokyo Games.

Dentsu dominates events, marketing, and PR in Japan, and helped land the 2020 Games for Tokyo. In 2018, Dentsu and eight other companies including Hakuhodo, ADK and Tokyu Agency, and a consortium won 26 open bids for the rights to plan 56 test events, which were designed to check operational issues prior to the actual event.

These nine firms and the consortium eventually managed the Tokyo Games, and authorities believe about ¥20 billion (US$148 million) was paid to them in total. Involvement in the pre-Olympic test events, or sporting competitions held prior to the main Games, would have put agencies at a clear advantage when it came to selecting firms to work on events during the main Olympic Games.

Investigations into the 2018 test events have now found that out of the 26 test events in the line of fire, ADK organised three of them at planned venues: contracts for the same amounted to a little over ¥100 million. As of November 2022, ADK voluntarily confessed its participation in the bid-rigging to the Fair Trade Commission and offered to fully cooperate. ADK is hoping for leniency, avoidance of criminal charges and a possible reduction in fines.

Japan Times reveals that the organising committee had a pre-prepared list of the companies based on their sports event management experiences, and it was shared among decisionmakers. Prosecutors believe that this list is evidence that the contract winners were predetermined.

A spokesperson for Hakuhodo, who won two bids worth around ¥40 million (US$290,000), acknowledged being raided and told Campaign that they will "fully cooperate with investigations."

Dentsu also issued a statement to Campaign, saying: “We continue to fully cooperate with this investigation.”

Who is Haruyuki Takahashi and what is the case against him?
 

Haruyuki Takahashi

Short answer: Allegations stack against him for bribery charges and for spearheading Tokyo’s bid for the Summer Games.

Explanation: Takahashi is a former senior managing director of Dentsu (now Dentsu Group) He left the company before the Tokyo Olympic organising committee appointed Dentsu in 2014 to help with marketing and sponsorship.

While serving on the Tokyo Olympic organising committee, Takahashi was deemed a quasi-civil servant and prohibited from receiving any money and gifts in relation with his profile. French prosecutors have been building a corruption case against him since 2016, and investigations revealed that he was leveraging connections from his four-and-a-half-decade career spearheading international sporting events at Dentsu for securing sponsorship deals.

In exchange for some of these deals, he allegedly took kickbacks totalling around US$1.4 million from these agencies. In an interview to Reuters in 2020, Takahashi admitted to giving gifts when lobbying International Olympic Committee (IOC) members such as the late Lamine Diack, the former disgraced Senegal president of International Association of Athletics Federations (IAF) linked to several far-reaching scandals, like the Russian doping case that tainted the integrity of the sport and the IOC. Though 88-year-old Diack died last year at his home in Senegal, the probe established Takahashi’s involvement the ex-Olympics powerbroker through the exchange of gifts, including digital cameras and a Seiko watch.

“You don’t go empty handed. That’s common sense,” Takahashi said in his defense to Reuters, referring to the gifts he gave Diack and his son Papa Massata, before adding: “They’re cheap.”

Takahashi did not specify the brand of watches. However, bank statements accessed as part of the probe found that the Tokyo 2020 bid committee made payments of US$46,000 to Seiko Watch.

The bribes from various Japanese sponsors make Takahashi the single-largest recipient of money from the Tokyo bid committee. Incidentally, payments to the tune of US$1.3 million were also made to a nondescript non-profit run by former Japanese Prime Minister Yoshiro Mori, a powerful figure in Japanese sports, also the head of the Tokyo Olympics organizing committee at the time.

Soon after fronting a successful campaign for Tokyo’s bid, he was inducted in the board of the organising committee and tasked with running the Summer Games for Japan.  

Takahashi has been indicted four times since August 18 on charges of receiving bribes amounting to ¥198 million (US$1.4 million) for pre-arranging Tokyo’s bid for the Summer Games. He has denied all allegations.

Snapshot of the various stakeholders embroiled in bribery allegations

Aoki Holdings (Clothing retailer)
Alleged bribery amount: ¥51 million (US$363,500)

This little-known clothing retailer who dressed the Japanese Olympic team is under the scanner for allegedly channeling funds to Yoshiro Mori to become a sponsor for the Games. This clothing company sold around 30,000 suits and jackets with the Olympic emblem; Tokyo prosecutors found that between October 2017 and March 2022 (coinciding with the sponsors selection process between January 2017 and June 2021) there were 50 'thank you' payments made to Takahashi’s account from Aoki.

Contracted sponsors for Tokyo 2020 were separated into three categories: gold partner, official partner or official supporter, Kyodo News says this selection was based on the amount they paid.

Aoki Holdings was named as an official supporter, Kyodo News quoting the standard fee for this tier was around ¥1.5 billion (US$11 million)

Kadokawa (media conglomerate)
Alleged bribery amount: ¥69 million (US$483,000)
 

The chairman of major publisher Kadokawa was indicted by prosecutors on October 4, 2022

A sponsorship win authorised the company to distribute programs, official guidebooks and records related to the Tokyo Olympics. The chairman, 79-year-old veteran media executive Tsuguhiko Kadokawa, was arrested on September 14 on grounds of giving ¥69 million (US$483,000) in bribes to the former executive Takahashi, in return for the company being selected as an official sponsor of the games. Kadokawa is a member of the company’s founding family, prosecutors have found payments funneled to a consulting firm led by Fukami Kazumasa, another former Dentsu executive with connections to Takahashi.

Daiko Advertising (subsidiary of Hakuhodo)
Alleged bribery amount: ¥15 million (US$104,000)
 

Daiko Advertising's headquarters in Osaka

Details of the public prosecutor’s inquiry reported in local news states that Daiko wanted Takahashi to secure a deal to become the sales cooperation agency, and Takahashi turned to Dentsu to make that happen.

Investigators believe Takahashi took underhand payments to secure Daiko a subcontract from Dentsu, a firm he once worked at.

Now, in April 2014, Dentsu was designated as the Tokyo Games exclusive marketing agency, and it was responsible for soliciting sponsors for the various events. Dentsu outsourced part of its operations to other ad firms, including Daiko, which covered the service sector.

The service company paid several hundred million yen to the organisers of the Games, while Daiko received its subcontracting fees from the organisers through Dentsu.

The special investigating squad believes Takahashi received cash from Daiko through a consulting firm headed by an acquaintance in 2018 or later in return for asking Dentsu to outsource some sponsor-soliciting work to Daiko.

ADK Holdings
Confessed to bid-rigging

In 2018, ADK secured contracts to organise three of the 26 test events at planned venues for the Tokyo Games. The three contracts amounted to slightly over 100 million yen. The idea was to identify administrative, security and other issues ahead of the Tokyo Olympics and Paralympics.

 Will the tainted image of Japan impact Sapporo’s Winter bid?

The timing of this scandal couldn’t be more inappropriate for Sapporo trying to seal the Winter Games 2030 mandate. Speculation is rife that the burgeoning scandal may tarnish Japan’s reputation as a fair nation and its bid for the 2030 Winter Games.

The International Olympic Committee has said it’s watching Japan’s investigation, stressing it had “every interest in the full clarification of this case”.

Seiko Hashimoto, who replaced Yoshiro Mori as head of the Tokyo 2020 organising committee after the former made sexist remarks about female sports administrators, conceded the bribery accusations could negatively impact Sapporo’s chances.

Describing the swirl of controversy as “very severe”, Hashimoto hopes investigators would get to the bottom of the 2020 allegations as soon as possible. “The significance and value of the Tokyo Games have come into question,” she said to Kyodo News agency.

“Japan’s image has been tainted," says Mark Forbes of Icon Agency. "There’s a greater need for transparency around the bidding process. The fact that revelations have spread internationally compromise the Olympics. Real consequences for those involved; sacking them, banning them from future sporting or government involvement, stripping any awards or titles—even calling for jail time for the worst offenders—provides symbolic and real evidence that the culture is changing."

Sapporo, which last hosted the Winter Games in 1972, is now the front runner for the Winter Games. Rival Salt Lake City was told by the US Olympic and Paralympic Committee “to wait until 2034, rather than host just 18 months after the 2028 Summer Games in Los Angeles.”

However, since this, Tokyo Games have been overshadowed with bribery allegations and Japanese IOC member, Morinari Watanabe believes “this could hurt Sapporo’s bid.”

Clockwise from top: Peter W. Humphrey (former corporate fraud and corruption investigator), Mark Forbes (director of reputation, Icon Agency), Gautam Kiyawat (professor of management practice, ESSEC Business School) 

With worldwide media scrutiny, sportswashing is increasingly getting harder to pull off. However, professor of management practice at the ESSEC Business School, Gautam Kiyawat, is less hopeful of any change.

“The moment you mix politicians, sports and advertising money together, there is bound to be some sort of a scandal," he says." But the good thing is that public memory is short lived. I am not condoning the bribery charges, but the scale of the scandal doesn't seem off the charts and the sad reality is that anyone in the marketing/sporting/political space has come to expect some level of corruption with any event of this scale."

Kiyawat believes that Japan’s credibility as a host nation is not on the line: “The scale of bribery is not massive or institutional, the amount is a ripple of a ripple [compared to] the FIFA scandals. If Qatar 2022 was allowed to take place after all the human rights and other allegations, then honestly, I don’t see what the fuss is all about."

"[While] the episode is negative publicity for Dentsu, it does not challenge their domination in Japan,” he adds.

That’s somewhat less pragmatic to what Forbes predicts.

“Dentsu will be damaged reputationally and suffer business impacts. But honestly, in the longer term, I believe it will retain its domination. Even if officials are jailed, Dentsu will distance itself from them and their activities (despite the evidence of corporate awareness of at least some of these activities),” Forbes says.

It's difficult to say if Japan can get the green light for another Olympics without addressing the structural problems of the last one, or whether it will soon be forgotten because public memory is a short-lived thing.