Do kickbacks and excessive entertainment really exist?
"I often hear that kickbacks and excessive entertainment are commonplace in the construction industry, but what's the reality?"
People who don’t work in the industry have started asking me this kind of question more often. Every time they do, I can’t help but feel disappointed, thinking to myself, “So that’s the image people have of the construction industry…”
Do such acts actually exist?
Let me get straight to the point. It definitely exists.
I haven't seen it myself, but I often hear stories like that. It seems there are still many people, especially in regional and rural areas, who resort to such tactics to land jobs.
The Reality of Excessive Entertainment
It’s not uncommon to hear stories about companies providing excessive entertainment to executives at prime contractors in order to secure work and be allowed to participate in construction projects as subcontractors.
In fact, just the other day, reports of excessive entertainment expenses by a major general contractor were exposed, sparking a great deal of discussion in the construction industry.
While the nature of these entertainment expenses—such as visits to hostess clubs and high-end adult entertainment establishments—was quite unscrupulous, excessive entertainment expenses in regional areas are much the same. The reality is that such entertainment often takes the form of nightlife activities like hostess clubs and adult entertainment establishments.
The Reality of Kickbacks
Unlike entertainment expenses, how exactly are kickbacks—where site supervisors and executives directly pocket the money—actually carried out?
According to what I’ve heard from industry insiders, they apparently submit site invoices with the amount of kickbacks added as business expenses. In addition, in rural areas, there were apparently transactions where people would bring envelopes containing cash directly to the site and hand them over at the site office.
After all, even if a subcontractor paid a cash kickback to someone at the general contractor, you’d think the money would be flagged as unaccounted-for funds and its whereabouts investigated—but apparently, such brazen transactions did take place.
The specific amounts of the kickbacks are reportedly around 500,000 yen for kickbacks to site supervisors, while kickbacks to executives of the general contractor run into the millions.
Honestly, it's just like something out of a movie or TV show...
Fraud Still Rampant in the Industry
I am absolutely convinced that this kind of misconduct is still taking place today. That’s because I’ve actually been approached about it myself.
I’m technically a site supervisor for a general contractor. An acquaintance at a civil engineering firm once asked me, “I’ll give you a kickback—could you find a way to pass this job on to us?”
Of course, I declined the offer, but it still made me realize once again that transactions like this are happening right under my nose, and it scared me a little.
I’ve also heard that, during bidding processes and the like, people have colluded with city hall officials to use slush funds and win construction contracts through fraudulent means, but I can’t say for certain whether this is true.
Ultimately, the one thing that can be said across the board is that even if you get a job through underhanded means, it won't last long.
If a company accepts kickbacks, it will become a habit, and the recipient will continue to demand kickbacks. For subcontractors, too, if they are constantly paying kickbacks or providing excessive entertainment, it will naturally put a strain on their finances.
Furthermore, if any problems arise, it’s easy to immediately draw resentment. If, for whatever reason, a company is unable to secure even a single subcontracting job, it will face resentment—with people saying, “But we’re paying kickbacks”—and in the worst-case scenario, this could lead to the scandal being exposed. In fact, this was the cause behind the discovery of fraudulent dealings at a major general contractor.
It is extremely important to take a long-term view when trading so that you don’t ruin your life for the sake of a momentary desire. Naturally, even if you see such trades happening around you, you must never get involved.
