Honda founder's son held for tax evasion
07-08-2003, 02:20 PM
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Honda founder's son held for tax evasion
Prosecutors allege his firm reported bogus expenses
By YUZO YAMAGUCHI | Automotive News
TOKYO -- The son of the founder of Honda Motor Co. Ltd. and an aide have been arrested here on suspicion of evading corporate taxes at Mugen Co., a maker of race car engines and auto parts with close ties to the automaker.
The Saitama District Public Prosecutor's Office says Hirotoshi Honda, 61, the president of Mugen and the scion of Soichiro Honda, together with Norio Hirokawa, 60, Mugen's former auditor and a former Honda executive, were arrested Tuesday, July 1.
The two are in custody pending investigation but have not been charged, officials say.
Prosecutors say Mugen evaded about ¥1 billion, or $8 million, in taxes by underreporting income over three years. The company padded its operational costs with fictitious expenditures and reported bogus losses, prosecutors say.
Honda Motor took a 40 percent stake in Mugen in 1993 but sold it back in 1999. It has no equity relationship with Mugen now but has some business ties.
With technological support from Honda, Mugen developed and supplied engines for Formula One cars between 1992 and 2000. Mugen also supplies performance-oriented aftermarket auto parts, such as suspensions and mufflers, for Honda models.
Mugen continues to develop and produce engines for other racing teams. Formula One cars equipped with Mugen's engines were in the winner's circle four times from 1992 and 2000. All teams in Formula Nippon, the top auto racing circuit in Japan, use Mugen engines.
In a statement, Honda Motor said, "We are sorry to hear that Mugen has violated the corporate tax laws in Japan." It added that Mugen had asked Honda for support and that the request "will be investigated in an effort to assist Mugen to restart its business as soon as possible."
Honda also said it would continue its commercial contracts with Mugen "until further action has been determined."
The case could be an embarrassment for Honda because of the connection to the automaker's founding family. The Yomiuri newspaper, Japan's largest with a daily circulation of about 10 million, carried the story as front-page news. The news comes at a time when Honda sales at home are stalling.
According to other Japanese newspapers, some of the funds from evading taxes was used to buy land in central Tokyo to house a memorial museum dedicated to Soichiro Honda.
Hirotoshi Honda set up Mugen in 1973 in part because his father had insisted that Honda Motor not hire any relatives of top Honda executives - including his son. That ban remains in place.
Mugen denied the allegations. "We believe our president is innocent," said Yoshiharu Ebihara, a Mugen spokesman. He has "no reasons for doing such a dangerous thing because he has huge assets," Ebihara said.
Ebihara said Hirokawa was responsible for the company's financial reporting.
Hirokawa was dispatched by Honda Motor to Mugen in 1993, when Honda took its stake in the company, to audit Mugen. He left Honda in 1996 and joined Mugen as a full-time employee, becoming assistant to the president at the end of 2000.
By YUZO YAMAGUCHI | Automotive News
TOKYO -- The son of the founder of Honda Motor Co. Ltd. and an aide have been arrested here on suspicion of evading corporate taxes at Mugen Co., a maker of race car engines and auto parts with close ties to the automaker.
The Saitama District Public Prosecutor's Office says Hirotoshi Honda, 61, the president of Mugen and the scion of Soichiro Honda, together with Norio Hirokawa, 60, Mugen's former auditor and a former Honda executive, were arrested Tuesday, July 1.
The two are in custody pending investigation but have not been charged, officials say.
Prosecutors say Mugen evaded about ¥1 billion, or $8 million, in taxes by underreporting income over three years. The company padded its operational costs with fictitious expenditures and reported bogus losses, prosecutors say.
Honda Motor took a 40 percent stake in Mugen in 1993 but sold it back in 1999. It has no equity relationship with Mugen now but has some business ties.
With technological support from Honda, Mugen developed and supplied engines for Formula One cars between 1992 and 2000. Mugen also supplies performance-oriented aftermarket auto parts, such as suspensions and mufflers, for Honda models.
Mugen continues to develop and produce engines for other racing teams. Formula One cars equipped with Mugen's engines were in the winner's circle four times from 1992 and 2000. All teams in Formula Nippon, the top auto racing circuit in Japan, use Mugen engines.
In a statement, Honda Motor said, "We are sorry to hear that Mugen has violated the corporate tax laws in Japan." It added that Mugen had asked Honda for support and that the request "will be investigated in an effort to assist Mugen to restart its business as soon as possible."
Honda also said it would continue its commercial contracts with Mugen "until further action has been determined."
The case could be an embarrassment for Honda because of the connection to the automaker's founding family. The Yomiuri newspaper, Japan's largest with a daily circulation of about 10 million, carried the story as front-page news. The news comes at a time when Honda sales at home are stalling.
According to other Japanese newspapers, some of the funds from evading taxes was used to buy land in central Tokyo to house a memorial museum dedicated to Soichiro Honda.
Hirotoshi Honda set up Mugen in 1973 in part because his father had insisted that Honda Motor not hire any relatives of top Honda executives - including his son. That ban remains in place.
Mugen denied the allegations. "We believe our president is innocent," said Yoshiharu Ebihara, a Mugen spokesman. He has "no reasons for doing such a dangerous thing because he has huge assets," Ebihara said.
Ebihara said Hirokawa was responsible for the company's financial reporting.
Hirokawa was dispatched by Honda Motor to Mugen in 1993, when Honda took its stake in the company, to audit Mugen. He left Honda in 1996 and joined Mugen as a full-time employee, becoming assistant to the president at the end of 2000.
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