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Bid rigging aftermath may trigger local bankruptcies

Date Posted: 2006-04-07

Construction companies are blasting Okinawa Prefecture’s Fair Trade Commissioners for their decision to recoup monies earned from illicit actions.

The commissioners are demanding 136 construction companies pay back Y3,060,000,000 as surcharges for contracts awarded as a result of bid rigging. Backed by political parties and economic groups, the companies are going to court seeking damages and reductions of the settlement amount.

Construction companies acknowledge bid rigging did occur, but charge the Prefecture is “the one that actually overlooked the bid rigging. That is wrong.” The construction executives charge the government with not following procedures, and now that the bid rigging is public, the Prefecture is trying to make it all seem the construction industry’s fault.

The government is seeking 10% of the contract amounts in damages, plus a surcharge, saying it represents the same amount as the involved companies’ three-years total profits. A lawyer for the construction company says “the Prefecture should have taken bigger responsibility, but they didn’t do anything even though they knew it was going on.”

Nearly all the 136 companies charged admit wrongdoing, but said “without doing bid rigging they wouldn’t have made a profit.” One company president promises, though, that “from now on we will do bids without bid rigging.” He says, though, that the companies will make only about 60% of what they do now, meaning workers will be laid off or salaries reduced.

Forty of the 136 companies are financially threatened by the settlement demand, and say it could force them to bankruptcy. There are 5,500 construction companies on Okinawa, and the involved companies say every company will feel the pinch.

A big concern is that large mainland companies will no longer offer construction jobs to local companies, perhaps not even issuing invitations to bid. Construction officials predict the Fair Trade Commissioners’ action will result in many hundreds of unemployed workers in the next few months.

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