OZAWA CRIES CONSPIRACY; VOWS TO STAY

C O N F I D E N T I A L SECTION 01 OF 02 TOKYO 000490

SIPDIS

E.O. 12958: DECL: 03/03/2018
TAGS: PGOV PREL JA
SUBJECT: OZAWA CRIES CONSPIRACY; VOWS TO STAY

REF: TOKYO 410

Classified By: CDA James P. Zumwalt, reasons 1.4(b),(d).


1. (C) Summary: Opposition DPJ President Ozawa is on the
defensive after the arrest of one of his political
secretaries on charges of accepting illegal campaign
contributions. Ozawa has denied knowledge of any wrongdoing,
suggesting that the investigation is politically motivated,
and says he will remain in his position as party leader. DPJ
executives have supported him publicly, but some DPJ
lawmakers are said to be calling quietly for him to step down
before he damages the party's electoral prospects. Ruling
coalition leaders have taken a cautious approach for now,
recognizing their own vulnerability on campaign finance
issues. PM Aso has said the incident will have no impact on
the timing of the next Lower House election, despite
widespread media speculation that the ruling coalition will
attempt to seize the offensive. End summary.

Ozawa Secretary Alleged to Have Accepted Corporate Money
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2. (C) Officials from the Tokyo District Public Prosecutors
office raided the private office of Democratic Party of Japan
(DPJ) President Ichiro Ozawa on March 3, arresting his
political secretary Takanori Okubo and removing evidence to
substantiate the receipt of illegal campaign contributions
from the scandal-tainted Nishimatsu Construction Co.
Corporate donations are prohibited under the Public Funds
Control Law, unless they are made to a political party or
political fund-management organization. Investigators claim
that Nishimatsu used dummy entities to funnel corporate money
disguised as employee contributions to two of Ozawa's support
organizations.


3. (C) Records are purported to show that one Ozawa support
group, the Tokyo-based "Rikuzankai," received the equivalent
of approximately USD 140,000 from the two dummy organizations
during the years 2004-2006. A local support group in Ozawa's
electoral district received funds equal to an additional USD
100,000. Okubo, a publicly funded political secretary and
former local elected official from the same district, is
accused of receiving and accounting for the bulk of the
funds. The two Nishimatsu-funded dummy organizations ceased
operations in 2006, but press reports allege that over the
years Ozawa may have received closer to USD 1.8 million from
Nishimatsu, starting in 1995.

Ozawa Cries Foul, Refuses to Step Down
--------------


4. (C) Ozawa reportedly told party executives on March 3 that
he considered the donations to be "personal contributions,"
but that he would return the money if it was found to be
illegal. In a press conference on March 4, Ozawa said there
is "absolutely no problem" with the contributions and
indicated that he had no intention of stepping down from his
party leadership post to take responsibility for his
secretary's arrest. "I have nothing to be blamed for," he
said, denying any knowledge that the funds had come from
Nishimatsu, "and my secretary dealt with these funds in
accordance with the law." "If we allow the public
authorities to exercise their power on their own terms, we
cannot protect our human rights and it will darken our
society," he intoned, hinting at a possible political motive
for the investigation. Other DPJ executives quickly jumped
to Ozawa's defense. "There must be a conspiracy," DPJ
Secretary General Yukio Hatoyama agreed in his own press
statement. DPJ Diet Affairs Chief Kenji Yamaoka railed
against the "impermissible use of political power," calling
it "a sign of the approaching end" for the ruling coalition.


5. (C) Prosecutors denied Ozawa's accusations, assuring the
press on March 4 that they were not politically motivated and
had investigated the fraudulent funds in a "straightforward"

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manner. "Given the problems with the donation," they added,
"we have determined that we cannot turn a blind eye out of
political considerations." Investigators refused to comment
on other potential political targets in the Nishimatsu probe,
but names such as former Prime Minister Yoshiro Mori and
Minister of Economy, Trade and Industry Toshihiro Nikai have
already begun to emerge in the press. Ozawa is widely
reputed to have deep connections to construction interests,
dating back to his time as right-hand man to former LDP
power-broker Kanemaru Shin. An Embassy contact speculated
that authorities may have accelerated the investigation in
order to beat the statute of limitations.


6. (C) Media reporting in the aftermath of Okubo's arrest has
focused on the implications for Ozawa's leadership and the
electoral prospects of the DPJ. The arrest comes at a bad
time for Ozawa. He has been criticized roundly in the press
and by members of every political party -- including his own
-- for his provocative comments concerning the U.S. military
presence in Japan. Even if he survives the investigation,
some of our contacts say, his position will inevitably weaken
within the DPJ, re-energizing anti-Ozawa elements and opening
the door to leadership struggles. Some DPJ lawmakers have
reportedly called quietly for Ozawa to step down quickly, to
avoid a negative impact on public perceptions of the DPJ.
DPJ Secretary General Yukio Hatoyama expressed a cautious
view on March 3, telling the press that the issue "does not
immediately require a judgment." Lawmakers from the other
opposition parties professed patience as well while they wait
for Ozawa to fully explain the situation. Political
commentators have noted that Ozawa should be held to the
highest standard, since he is campaigning on the slogan of
political reform.


7. (C) Some speculate that the ruling coalition will use this
opportunity to dissolve the Lower House quickly for a snap
election, hoping to put the DPJ on the defensive. Embassy
contacts note, however, that the LDP will be reluctant to
make money scandals the focus of the campaign, given their
own vulnerabilities in that regard. A Komeito lawmaker told
the Embassy that the ruling coalition had mixed feelings
about Ozawa stepping down, noting concerns that Ozawa could
be replaced by former DPJ President Katsuya Okada, a "very
clean" politician and the "only other DPJ leader capable of
holding the party together." Prime Minister Taro Aso has
been measured in his response, reminding reporters on March 3
that his primary focus is the economy, and that the arrest
"will not affect the timing for the dissolution of the Lower
House."
ZUMWALT