In a now-legendary episode, the US Treasury Department took down notorious Chicago mobster Al Capone. Now the same organization has its sights set on gangs far across the Pacific.
Last week, the Treasury tightened the noose around Japan’s largest crime syndicate, the Yamaguchi-gumi, by targeting two front companies and placing four high-ranking members, among 21 individuals in total, under economic sanctions.
It was the first time the United States has targeted specific corporations run by a yakuza group for their blacklist. In 2011, then-US President Barack Obama first issued executive orders placing financial sanctions on several transnational criminal organizations, including the yakuza – notably the Yamaguchi-gumi, the Inagawa-Kai and other organizations.
The latest sanctions look set to drive a deep wedge into the gangs’ international operations.
Hidden in plain sight
The Japanese mob hardly lurks underground. The 22 crime groups collectively referred to as “the yakuza” are regulated under several laws, but not outright banned: The gangs have office buildings, business cards and even fan magazines devoted to their exploits and history.
The Yamaguchi-gumi has been in business since 1915 when it started as a labor dispatch service on the docks of Kobe. The current 6th generation leader, Kenichi Shinoda, known both for his dapper fashion sense and his spartan ethic, has given interviews to a national newspaper and is somewhat of a celebrity.
The Yamaguchi-gumi headquarters in Kobe is almost as big as a city block and built like a fortress. It’s no secret: The address is listed on the National Police Agency website. In an effort to get along with its local community, which includes international schools, the gangsters open the compound on special occasions like Halloween and hand out treats to kids and families attending. At New Year, they even host rice-cake making events.
Both companies placed on the US sanctions list have a role in the maintenance of the Yamaguchi-gumi headquarters.
Yamaki K.K. owns the land where the headquarters is located. Toyo Shinyo (East-West Trust) Jitsugyo K.K. manages and maintains the facilities as well as other real estate used in the group’s business activities.
Both companies are located at the same address – which from the outside, appears to be a run-down Japanese home, with simple nameplates.
While much of the group’s revenue comes from illegal enterprises – racketeering, extortion, loan-shanking and fraud – the Yamaguchi-gumi has always had a hand in legitimate enterprises since the end of the war.
The influential “Godfather of Godfathers,” Kazuo Taoka, once famously told his underlings: “Be a yakuza – but have a legitimate occupation as well.”
Swords, guns and foot soldiers
The term “yakuza” is considered to refer to a losing hand in a Japanese card game – making it a self-depreciating term recognizing that gangsters are “losers” – but some scholars believe it is actually a degraded form of the word yakusha, or stage actor.
The yakuza exist in Japan under the guise of being “humanitarian groups”, or ninkyo dantai, that preserve public order and traditional Japanese values.
In reality, the yakuza only date back to the 1880s, originally as federations of gamblers and/or street merchants. The Yamaguchi-gumi was set up in 1915, structured very much like a corporation. In the post-World War II war chaos, the Yamaguchi-gumi led the way in setting up real-estate agencies, labor dispatch services and even their own powerful talent agency, Kobe Geinosha, until the police forced them to close down many of their operations.
Their main revenues came from blackmail, racketeering, gambling and extortion, but the Yamaguchi-gumi banned their members from common theft, robbery, sexual assault or common street crimes; so shaping their image as contributors to public peace.
In 1992, when Japan’s first anti-organized crime laws went on the books, all gangs were forbidden from displaying their organization logos on their doors. In response, they began setting up legitimate-sounding companies as their new offices.
However, some yakuza found they could actually make money running legitimate enterprises as well as their more traditional criminal businesses. So they did. The front companies were surprisingly diverse.
When this correspondent was a cub reporter covering crime in Saitama 24 years ago a gang war was underway between the Yamaguchi-gumi and the Kokusui-kai. A Yamaguchi-gumi foot-solider, Takehiko Sugaya, had shot two gangsters at point blank range and then stabbed a third on his way out during a raid on a Kokusui-kai outlet.
At the scene of the crime, I saw, over the door of the office, a sign reading “Eastern European Private Detective Agency.” The Kokusui-kai’s offices doubled as a private investigation firm which advertised in the phone book and had other branches.
It specialized in cases of infidelity – but was ethically challenged. Sometimes, they would lie to the client that his or her spouse was not having an affair – then blackmail the cheating partner.
At the height of his power, one of the most famous yakuza pit bulls, Yamaguchi-gumi’s financial wizard Tadamasa Goto, owned about 100 front companies in Tokyo. They included a major talent agency, a film production company, a hedge fund, a restaurant, a hotel, an art dealership and more.
He was also the largest individual shareholder of Japan Airlines — making him a sort of Richard Branson of organized crime.
The yakuza also discovered that you could use a firm to secure loans from a bank, make a few payments, declare bankruptcy and keep the majority of the loans. The yakuza became Goldman Sachs with swords, guns and serious leverage.
They also gave their employees corporate perks. After the Ichiwakai faction split from the Yamaguchi-gumi in 1984 resulting in a gang-war that lasted until 1989, the organization eventually lured back many members by offering a pension plan. Four years ago, a top executive would receive close to US$800,000 upon retirement.
Yakuza groups have transcontinental ties with groups in China, Southeast Asia, Europe and the Americas. They are setting up businesses in Singapore and other countries where they can operate under the radar.
Inside and outside Japan, their front firms operate in legitimate sectors including construction, real estate and finance. They use these businesses to launder money and hide illicit proceeds, according to the US Treasury Department and Japanese police.
In the United States, yakuza have been involved in money laundering, drug trafficking, prostitution and the attempted procurement of weapons, including military-grade hardware for use in gang wars.
Back home, the main yakuza groups, via more complex front companies including auditing firms, securities companies and investment funds, had infiltrated the stock market so heavily that Japan’s National Police Agency warned in a 2008 white paper: “The yakuza threaten the very foundations of our economic existence.”
The police, prosecutors, banks and National Tax Agency started sharing information to take them out of the corporate world. Now, Washington is bringing the big guns to bear.
Godfathers in the gunsights
Twenty one individuals have been hit with US sanctions, including four big bosses. They are: Utao Morio, manager of the Yamaguchi-gumi headquarters and former chief executive of Yamaki; Chikara Tsuda, current Yamaki CEO; Yasuo Takagi, chief executive of Toyo Shinyo Jitsugyo; and Katsuaki Mitsuyasu, the latter company’s former chief.
Takagi’s name is well-known in US law enforcement circles. From 2001 to 2003, Takagi oversaw a complex loan-sharking empire of 1,000 shops, managed by his underling Susumu Kajiyama, which generated annual revenue of a cool billion dollars.
What put him in the US crosshairs was when Takagi’s faction of the Yamaguchi-gumi – Goryokai – laundered several million dollars of those ill-gotten gains via Las Vegas casinos before being caught by US Immigration Customs Enforcement.
The group also laundered money in Hong Kong, and under Takagi’s command, Kajiyama laundered money within Japan including buying a chain of fried octopus ball – takoyaki – restaurants. When reporting the case, I tried out the restaurant and recall that the quality verged on the excellent.
However, Takagi’s group also invested in a brothel – and ordered his men to patronize it using their own money.
“The service was so terrible, the women so poorly paid and the place so dingy, that I would just put down my money and have a smoke,” one former gangster told me. “It was the visits there that made me realize that our boss really had no decency at all.”
Another sanctioned individual is the now allegedly retired gang boss Goto. The famous Yamaguchi-gumi mobster infamously obtained a liver transplant for himself and three other yakuza at UCLA Hospital, by trading gang secrets for a visa to the United States in a deal made with the FBI.
Goto was banished from the Yamaguchi-gumi on October 14, 2008, but established a new criminal empire in Cambodia where he is considered a guest of the state.
Cambodia doesn’t seem to mind having him, but his chances of getting another liver transplant in the US are now next to nil.
What do the sanctions do?
The US Treasury Department has done its homework, including publishing detailed oversights of yakuza operations. Sigal Mandelker, the treasury’s undersecretary for terrorism and financial intelligence, explained the new measures, saying: “We are ramping up pressure on this dangerous Japanese crime syndicate and local gang leaders who profit from everything from sexual exploitation, to weapons smuggling, and extortion.”
The sanctions freeze any assets of those named that are under US jurisdiction and prohibit US individuals and companies from dealing with them. This discourages US individuals from partnering with the yakuza or handling their accounts. That works both ways. Citibank has twice been sanctioned, not by Washington, but by Tokyo, for handling yakuza money.
“By exposing this broad network of front companies and individuals supporting the Yamaguchi-gumi yakuza syndicate we intend to disrupt the global financial infrastructure of this illicit transnational criminal organization,” said Mandelker in a statement.
However, there has only been one successful arrest and prosecution of a major yakuza boss on US soil. That case proved that truth is stranger than fiction: Known as Operation Tropical Storm, it involved a Japanese-Jewish special agent, Jim Stern, going undercover to lure a drug-dealing Kyokuto-kai boss to Hawaii in 1993.