Tokyo Olympics clean-up hits big businesses

A few months after last year’s Tokyo Olympics, an Osaka liquidation company quietly began the job nobody wanted to admit was needed: the disposal of truckload after truckload of fluffy toys, branded clothing and other detritus from the most heavily sponsored sports event in history.

Some of the merchandise mountain — created for an event that cost twice what was first envisaged and was held without spectators — was dispatched to poor Cambodian villages. Some were donated to local childcare institutions, while some were sold off for a tiny fraction of the original price.

But since the summer, Japan has embarked on a far bigger, far darker and far more public post-Olympic clean-up: a rapidly ballooning investigation into alleged sponsorship-related bribery that has engulfed household-name companies and put top executives behind bars.

Haruyuki Takahashi, a powerful member of the Tokyo Games organising committee and a former senior executive at Dentsu, Japan’s biggest advertiser and arguably the country’s most influential company, has been in custody since August.

Takahashi’s arrest triggered internal panic over whether all sponsors would come under scrutiny for an event that in the end delivered almost no commercial benefit, said people at two of the Games’ “Gold” sponsor companies.

The founder and former chair of Japan’s biggest maker of business suits, Aoki Holdings, was also arrested in August, followed last month by the chair of Kadokawa, a major publisher which was closely involved in the Games.

Even Sun Arrow, which produced the unsold fluffy mascots, is reportedly under investigation over how it won the right to do so. Sun Arrow declined to comment.

“This is a clear-out, plain and simple, and it is going to claim more heads,” said a person close to one of the handful of Games-linked companies whose offices were raided by prosecutors this year.

If Japan was not seen to fully deal with suspected corruption from the Tokyo Games, then it would be unlikely to succeed in its bid to host the Winter Olympics in the northern city of Sapporo in 2030, the person added.

Long before the Olympic torch reached Tokyo in July last year, questions had swirled around the role of Dentsu, a company on which Games organisers leaned heavily as they secured roughly $3bn in sponsorship and set about staging one of the most expensive Games ever.

The advertising giant has admitted it is under investigation by prosecutors, as has smaller rival ADK and parking lot company Park24.

Dentsu was hired in April 2014 and was able to convince more than 40 Japanese companies to become sponsors. In the scramble to participate, sponsors accepted non-exclusive contracts, paying a fortune but often having to share the privilege with their main rivals.

The sponsorships ultimately yielded very little financial benefit after the Games were postponed for a year because of the coronavirus pandemic and then held without spectators.

A survey by Nomura Research Institute conducted shortly after the event found that only 2.6 per cent of 3,564 people surveyed had bought any official goods produced for it.

“Our original plan was to print and sell the official guidebook and other printed materials, so there was an estimate that if everything was sold, that would bring a profit,” Kadokawa president Takeshi Natsuno said at a news conference last week following the indictment of the publisher’s chair.

“The Olympics were held without spectators, and as a result, there was no significant profit,” Natsuno added.

Tsuguhiko Kadokawa, Kadokawa’s chair, stepped down from the role after his indictment but has maintained his innocence.

According to a report by an outside panel of attorneys released by Kadokawa, the company’s legal department had raised questions in advance about the legality of 2019 payments to an acquaintance of Takahashi.

“There were suspicious acts that could be evaluated as bribery,” Tadashi Kunihiro, the head of the panel, said last week.

Prosecutors alleged that Takahashi, who left Dentsu in 2009, received a total of ¥142mn ($980,000) in bribes from Aoki and Kadokawa as well as advertising agency Daiko, which is suspected of paying Takahashi and the acquaintance to win a role in the sponsor solicitation process.

Takahashi could not be reached for comment but he has repeatedly denied the allegations of bribery. Aoki said in September that it would continue to co-operate with the authorities following the indictment of its chair, who could not be reached for comment. Daiko said it would co-operate fully with investigators after one of its executives was arrested last month.

Taisuke Matsumoto, an expert on sports law at Waseda University, said Japan would need to end the role middlemen such as Takahashi had played in selecting sponsors if it wanted to host the 2030 Winter Olympics.

“An independent supervision is needed for a hosting organisation to improve governance ahead of the Sapporo Games,” Matsumoto said.

Back in Osaka, liquidation company Shoichi managed to salvage some value from the Games merchandise. But company president Shoichi Yamamoto was critical of Games organisers, saying some sponsors were left with huge inventories after their contracts ended late last year and had no choice but to throw away their goods.

“It sounds irresponsible for the Games organising committee to dissolve itself without dealing with unsold inventories, even though the Games value sustainable development goals,” Yamamoto said.