The scheme to secure ¥900 million in profits even after the fraud was discovered…Big Motor allegedly “made a killing by rigged bidding at auctions

Two months have passed since the series of problems related to Big Motor’s fraudulent insurance claims were exposed. However, there is still no sign that the turmoil is over.

In July, when the fraud was discovered, the company’s recurring profit was approximately 900 million yen higher than it had been in April. This is the same level as in April, the month before the fraud was discovered. However, this was the result of selling part of our inventory of 50,000 used cars and scrambling to secure profits. The number of customers has been dwindling, and we expect to have an even tougher time in the future,” said a current employee working in the sales department.

Sales of used car inventory is currently the company’s largest source of revenue. However, a new allegation has been raised there as well. The “auto auctions” for dealers are said to be a breeding ground for fraud. As the name implies, these auctions are where dealers buy and sell used cars in an auction format, and a total of more than 100,000 cars are traded at auction houses nationwide in a single week.

Big Motor is said to have colluded with a semi-major auction company, X Corporation, and has been involved in illegal activities at this fundamental venue of the used car industry. Mr. A, who works for another auction company in the Kanto region, revealed the following.

“Big Motor is conducting ‘illegal bidding’ on a company-wide basis,” said Mr. A, who works for another auction company in the Kanto region. Auction regulations prohibit bidding on the company’s own vehicles. If you can bid on your company’s own vehicles, you can raise the price as you wish, and this is such a serious fraud that if it were discovered, you would be banned from the auction in an instant. However, Big Motor has repeatedly engaged in this illegal bidding at auctions hosted by Company X in an attempt to drive up prices.

Mr. A then began to tell us about the actual state of the fraudulent bidding, which he had witnessed firsthand.

The other day, this happened to a luxury car I was trying to win. I got out when the price went up to just under 2.4 million yen, but after that, two companies remained and the price went up rapidly. Finally, the price soared to just under 2.5 million yen. I felt uncomfortable with the price increase, so I asked a friend of Company X. As a matter of fact, one of the bidders was Big Motor. There was no doubt in my mind that the post numbers (numbers given to exhibitors and bidders) were the same.

As a result, the competing used car vendor won the auction at a price nearly 100,000 yen higher than the original bid.

At auto auctions, only the person in charge of the auction organizer can know the information of the bidders and winners. I don’t think the other bidders imagined that they were competing with Big Motor, the seller.

Mr. B, another person involved in the auction company, continued, “Big Motor has a product management department.

At Big Motor, a department called the Product Management Department determines the desired sale price while examining the market. If the price is below that level, the company uses its own account to bid. Executives from Big Motor were also transferred to Company X’s predecessor company. The management, including former president Hiroyuki Kaneshige (72), must have been aware of the misconduct.

Company X operates nationwide, with 3,000 to 4,000 vehicles sold at a single auction at its largest site in the Kanto region. Mr. B is outraged.

Mr. B expressed his resentment, saying, “The current auctions are like a situation where each vendor is buying at Big Motor’s bidding price. The one who is cheating is the one who gets the sweetest ……. I don’t think such a thing should ever be allowed to happen.

Company X Tacitly Approves of Fraud

Both Mr. A and Mr. B assert that “Company X is aware of this and tacitly approves of it. This is supported by the unbelievable cancellation fees.

Company A and Company B both confirm this, saying, “If you continue to bid unfairly, of course you will often end up winning the bid for your own car. It’s about 30 percent of the total. In that case, we cancel the winning bid, but normally it would cost more than 60,000 yen per car in penalties and fees. However, Big Motor pays only a few thousand yen to Company X for each cancellation. So Big Motor can bid anyway, and if they win the bid, they can cancel it.

There is also an advantage if you do not cancel. The winning bid price will remain as a history, and the market price of the same car model will be determined afterwards with reference to it. In other words, as a result, the market price is raised, and there is a possibility of selling the car at a higher price.

But why does Company X tacitly approve of this fraud that can only benefit Big Motor? Kumiko Kato, an automotive journalist and expert on the used car industry, explains.

In fact, it can only be beneficial to Company X. First of all, Big Motor is a major customer of the company. First of all, Big Motor, which is a major customer of the company, gives them priority in the auction. Since the main sources of income from auctions are listing fees and contract fees, this will directly lead to an increase in sales for Company X. In addition, if the auction prices are higher, the auctioneer will be able to sell more cars at a lower price.

Also, if the market price of successful bids becomes higher, more companies in the industry will participate in the auction as they believe that they can sell at a higher price if they put their vehicles up for auction there. This is a lot of sweet nectar for Company X.”

Was there really fraudulent bidding at the auction? When we sent a letter of inquiry to Big Motor’s public relations department, the response was, “We are currently confirming the facts, so we will refrain from giving an answer at this time.

We also inquired at the public relations department of Company X about the actual state of tacit approval of the fraud, but they responded in the same manner as Big Motor, “We are currently confirming the facts internally, so we will refrain from commenting on the matter.

Big Motor colludes with auction companies to prey on its competitors, and given that Company X is a nationwide company, there are many competitors throughout Japan who have been victimized. In addition, the increase in wholesale prices will ultimately affect the general public, the buyers.

Attorney Yuka Kofuji of Hibiki Lawyers points out, “Not only can they be held liable for civil damages, but they can also be held criminally liable.

It is a new type of bid rigging in which the bidder and the organizer work together. This has caused other vendors to misjudge the value of the goods and pay more money than usual, resulting in economic loss. This can be a fraudulent act under the criminal law. Company X also plays too large a role in the fraud. It goes beyond aiding and abetting, and there is a strong possibility that Company X itself will be charged with fraud as a regular offender.”

Big Motor’s sales to Company X continue to this day. To make up for the rust that has come out of their own bodies, they are now involved in new fraudulent activities. What is needed most for the company’s restructuring is to improve the fraudulent nature of its business.

From the September 29, 2023 issue of FRIDAY