Tax Trial of Ex-Kingpin Starts in Japan

Shin Kanemaru, once the most powerful figure in Japanese politics, pleaded not guilty Thursday to tax evasion in the start of a spectacular trial that could further rock Japan’s political world and expose the corrupt ties between politicians and the construction industry.

He is charged with evading nearly $10 million in taxes on $17 million of unreported income.

As the Liberal Democratic Party that Kanemaru once ruled reels from internal dissension and the impending resignation of Prime Minister Kiichi Miyazawa, the onetime kingmaker, 78, made his first public appearance in four months. Looking frail in a wheelchair, he told the court that the $17 million he received between 1987 and 1989 was going to be used to reshape Japanese politics rather than to line his own pockets.

“I had no intent whatsoever to evade taxes,” Kanemaru said, reading from a scrawled statement. “I was preparing for my dream to realign the political world.”

But prosecutors argued in the 90-minute opening hearing at Tokyo District Court that Kanemaru took the money--largely unreported political contributions from construction companies--and converted it to anonymous bearer bonds for the sole purpose of evading taxes.

Then, fearing his holdings would be discovered when prosecutors began investigating a money-and-mob scandal last year, Kanemaru reconverted the bonds to cash and stowed the money in his bedroom in Yamanashi prefecture, prosecutors say.

Prosecutors charged that major construction firms in Tokyo and Osaka and builders in Yamanashi supplied Kanemaru with $9.2 million a year from 1987 to 1990 to win public works contracts.

All told, prosecutors estimate that Kanemaru’s hidden riches could top $60 million, stashed away in anonymous bearer bonds, gold ingots and crisp notes. But much of that appears outside the reach of the law.

The loot collected before 1987 may be protected by the statute of limitations, and prosecutors have decided to accept Kanemaru’s testimony that money he amassed in 1990 and 1991 was for political funds and not taxable.

Kanemaru’s former secretary, Masahisa Haibara, 49, pleaded guilty to charges of evading $3 million in taxes on $5.6 million in income, but denied charges of conspiracy to help his boss evade taxes.

The spectacular probe, involving 1,525 investigators and more than 18 months of time, has shaken Japan’s political world.

Kanemaru, who once handpicked prime ministers, is now widely seen as a symbol of corruption and greed.

Authorities said Thursday that Kanemaru could face as much as $25.5 million in fines and back taxes for the three years covered in the trial as well as for 1986. He also would face five years in prison. The next hearing is due Sept. 7.