New Allegations: Former Big Motor Accused of Fraudulent Paint Billing at Itochu

The former Big Motor received support from three companies led by ITOCHU Corporation, and a new Supported by Itochu Corporation and two other companies, the new company “WECARS,” which took over from the former Big Motor, started its operations on May 1st. Shinjiro Tanaka (61), formerly of Itochu, assumed the position of the new president, and the company inherited over 4,000 employees and around 250 stores nationwide.

 

As part of the acquisition conditions, Itochu has emphasized the transformation of the company into one that prioritizes compliance. Since the launch of WECARS in May, at the request of Itochu, investigations have been conducted regarding vehicles that underwent insurance repairs in the past ten years at former Big Motor body shops nationwide, including those that have been closed down.

Amidst this, information has emerged concerning new fraudulent billing suspicions that occurred during the tenure of former President Hiroyuki Kaneshige (72), who pursued profit-oriented practices. The suspicion revolves around gratis test paints provided by paint manufacturers being falsely invoiced to insurance companies as paid paints.

The paint in question is a water-based paint called “E-CUBE WB (2:1) NN Clear” manufactured by Nippon Paint. This product was provided free of charge to the former Big Motor at least from February 2020 until its commercial release in October of the same year. However, according to sources familiar with the situation at the former Big Motor body shops, “Despite being provided free of charge, it was invoiced to insurance companies at regular prices.”

“We heard that water-based paints were provided free of charge as they were test products developed jointly with Nippon Paint. However, when preparing estimates for insurance companies, we were instructed to invoice material costs similar to those of paid paints we usually purchase, which was surprising. The instruction came from the head of the body shop division. The product was incomplete, and the staff on the ground struggled a lot.”

With these words, the source showed me an image on LINE. It was identified as a “price list” sent from the former Big Motor’s body painting department to body shops nationwide. The date was marked as as of February 2020, and the name of the head of the body shop division was listed in the bottom left corner. “MS” is an abbreviation for “Mitsui Sumitomo,” a reference to a specific insurance company.

I want you to look at the “2 Material Cost Percentage” on the price list. The water-based paint refers to “E-CUBE WB (2:1) NN Clear.” The percentages written in each column indicate the proportion of paint costs to the total painting expenses. In other words, they are instructing to bill for “E-CUBE WB (2:1) NN Clear,” which should have been provided free of charge. Additionally, in the columns for “3 All-Water-Based Surcharge” and “4 Booth Surcharge,” it is explicitly stated to add additional charges for items such as extra working hours.

“This table shows how much to bill the insurance company when using water-based paint. Actual billing to insurance companies was done according to this. Big Motor made it mandatory to use water-based paint, and they dealt strictly with workshops that secretly used oil-based paint, even requiring them to submit reports. Perhaps schemes like this were behind it all.”

If the test water-based paint was indeed fraudulently billed, this is a significant issue. There were also complaints from the field regarding the introduction of water-based paint. This paint was first introduced in Kanto and Western Japan factories, and a body shop worker from Western Japan reveals the situation.

“Water-based clear paint is a good product considering the environment and workers’ health, but it is very difficult to handle. Firstly, it takes significantly longer to dry compared to solvent-based (oil-based) paint. The finish was often not satisfactory, leading to numerous complaints even after delivery.”

A former painting staff member also recalls, “It was hell back then.”

“When the water-based paint was first introduced, it was the toughest time we’ve ever had. We used to finish around the end of the workday, but then we had to work until around midnight every day. It was hell. Even after finally finishing and delivering the cars, there was a flood of complaints from customers and insurance companies. Handling complaints was unpaid work, and it was really tough.”

A 40-year-old owner of a subcontracted body shop also doesn’t hide his anger.

“In recent years, there have been several significant price increases for paint. All shops struggle with procurement. The fact that they received free supply for such a long time is outrageous. This will undoubtedly cause a lot of resentment from body shops like ours. Moreover, if they billed insurance companies for repair costs using what was supposed to be free paint, it’s truly unacceptable.”

I asked the three major insurance companies about the situation at that time, and all of them responded, “We knew that Big Motor started using water-based paint, but we were completely unaware that some of it was provided for free.” The responses from each company are as follows:

Sompo Japan:

“We are not aware of this. It is difficult to grasp the procurement prices and usage amounts of materials for each business, so we generally calculate repair costs based on typical expenses. While we do not understand this as an issue of seeking insurance payment returns, we will take appropriate action upon confirming the facts if fraudulent billing is identified.”

Mitsui Sumitomo Insurance:

“We are not aware of whether the paint was provided for free and are not in a position to know. We consider this a private transaction between Nippon Paint and Big Motor. Even if the allegations are true, we believe that no insurance payment returns will be sought, as we negotiate repair costs on a case-by-case basis and pay reasonable amounts.”

Aioi Nissay Dowa Insurance:

“We cannot comment as we have not confirmed the fact that materials such as paint were procured for free and billed to insurance companies. If it is confirmed that materials provided for free were billed as paid items, we will consult with our legal advisors and take appropriate action.”

I also confirmed this matter with the public relations department of Nippon Paint Holdings Co., Ltd., and received the following response by the deadline:

“In field tests where we use pre-market products in body shops, we provide the paint free of charge. The period is usually one week per shop, and at most about a month. The ‘E-CUBE WB (2:1) NN Clear’ is a product that was released on October 8, 2020, and according to our records, it was shipped via local paint dealers on October 9. Because paint dealers specialize in this, it is unclear how many ended up in Big Motor’s stores.”

While both the insurance companies and the paint supplier consistently say they “didn’t know,” what does the accused party say? When I confirmed the facts with the public relations department of the former Big Motor (now the public relations department of the compensation company ‘BALM’), I received the following response:

“While we refrain from disclosing details of individual transactions, we do not recognize the transactions in question as fraudulent billing.”

Furthermore, a source from the aforementioned body shop department mentioned another fraud suspicion: although they billed insurance companies for the expensive ‘all-water-based’ process using only water-based paint from base to topcoat, in reality, they used cheaper oil-based paint.

With the numerous instances of fraudulent billing coming to light one after another, one wonders how much Itochu is aware of.