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The Japanese MMA landscape is fraught with peril

By Jeff Comstock | October 18, 2007

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By Jeff Comstock

Pride Worldwide abruptly shuts down operations, citing “uncooperative staff from Dream Stage Entertainment” – Pride’s former parent company, as the reason for the company’s inability to conduct business operations in Japan. This might seem surprising if it weren’t for the documented reasons for Pride’s financial collapse and subsequent sale in the first place.’s archives are full of such documentation but perhaps a little analysis of foreign investment in Japan and the problems faced with doing so is in order. In particular when it comes to dealing with Japan’s organized crime syndicates. Due-diligence when investing in Japan often involves employing as many former FBI and other law enforcement agents, as it does accountants.

On November 6, 2001, the Japan Society heard a panel of experts on Japan’s underworld share their knowledge of Yakuza behavior and debate the extent of financial risk to foreign investors. Yakuza Inc.: Foreign Investment Meets Organized Crime in Japan, Robert Whiting, author of Tokyo Underworld states:

“If your standard is that you will not do business with any firm with connections to the Yakuza, you might as well not come to Japan.”

From Prospering on Crime: Money Laundering and Financial Crisis (PDF):

When the speculative bubble burst at the beginning of the 1990s, stock and real estate prices dropped, and bad debts swamped the banks and other financial institutions. The former director of the National Police Agency, Raisuke Miyawaki, estimates that 10% of these debts are yakuza-related and an additional 30% have probable links with organized crime, which would put such non-recoverable debt attributable to gangsters at somewhere between $75 and $300 billion, that is, 6.5 percent of GDP.

The Yakuza recession is a great article dealing with the role of organized crime in the Japanese economic collapse of the 90’s and how prevalent they are in all sectors of the economy. The banks in Japan loaned scads of money to Yakuza at the height of the Japanese economic bubble in the 80’s. The Yakuza used that money to invest themselves in nearly every industry in Japan. The Yakuza recession is a great history lesson and also provides some great insight on what foreign investors can face when investing in Japanese companies:

Starting in the late 1990s, U.S. investors began aggressively buying assets from cash-strapped Japanese companies. To date, they have spent at least $15 billion on everything from golf courses, theme parks and property to car, chemical and pharmaceutical companies and pachinko pinball-machine parlors. High-profile American deals in Japan include the giant Ford Motor Co.’s takeover of Mazda Motor Corp.

Banking-industry insiders say some U.S. investors took stakes in enterprises that turned out to have ties to the yakuza. Earlier this year, for instance, the Tokyo office of U.S. institutional investor Lonestar was besieged by Japanese right-wing extremists after it bought Eventail, a golf-course management company allegedly with ties to the yakuza.

An employee in Tokyo for the U.S. fund declined to comment. However, a Tokyo-based property analyst familiar with the incident says the company is “pretty cavalier” in its approach to business risks in Japan. “Maybe they see a chance to make so much money, so fast, that they can return to the United States before they encounter really serious trouble,” he says.

In stark contrast, blue-chip U.S. investment banks leery of hurting their reputations have taken the unusual step of supplementing the accountants who do much of their due-diligence investigations with former FBI agents and other U.S. law-enforcement officials. These days, some U.S. financial institutions examine three to four deals a week for possible yakuza involvement; all told, in the past two years alone, they have used electronic databases, private investigators and contacts in the Japanese police, government and underworld to conduct at least 600 such investigations. Many of the former U.S. law-enforcement agents who headed those probes were familiar with the yakuza from their days of public service. But even so, what they uncovered left them intrigued, amused and in some cases shocked.

To begin with, they found yakuza active in literally every sector of the Japanese economy; not only in areas such as construction, entertainment and trucking that have long been suspected of heavy yakuza involvement, but in everything from chemicals to hospitals. “In many ways it’s easier for yakuza to operate hospitals,” says a former FBI agent who has overseen investigations into 300 Japanese companies on behalf of a major U.S. investment bank. “Nobody expects them to be in that kind of business.”

The Ferttita’s knew that what they were purchasing was “tainted” to quote Dana White. The Japanese press has outed DSE’s supposed ties to organized crime, mostly through an article series in the weekly magazine, Shukan Gendai. As we can see from the quote above, the due diligence being performed, should have been as concerned with Pride’s alleged ties to organized crime as with the company’s books.

Some understanding of the politics of the company might have saved the new Pride Worldwide owners much hassle. Many of the DSE staffers who were kept in their positions, would still hold allegiance with the former owners or other forces, whose agenda would be in conflict with those of the new American owner.

As the Pride Worldwide staffers were fired and it’s offices secured and cleared out, those other forces were clearly waiting, if not actively working towards the day that the hammer would fall. The real business being done to bring a large scale MMA production to the Japanese fans was going on outside of the purview of Pride Worldwide and they were now ready to unveil their work.

As if on queue a press release was sent out to the Japanese MMA media from a new company called World Victory Road Inc. in Japan.

The brainchild of former UFC Japan promoter Akira Sakata, who due to less than savory ties to the underworld will doubtfully ever hold any official position with the company. World Victory Road Inc. as well as the newly formed Japanese MMA Association were presented to the public during a press conference within days of Pride Worldwide’s office closing.

Jordan Breen and Stephen Martinez’s Sherdog article: New Japanese MMA Event, Association Introduced lays out the details of the new fighting promotion and regulating body’s first press conference. A cast of national sports heroes, legitimate businessmen and former state officials like former Tokyo Police Chief, Yukihiko Inoue, lend the new MMA entity both credibility and financing in their official capacities.

World Victory Road presents a friendly face to the public, making sure to keep any controversial individuals involved out of the public spotlight. Much of this new organization’s success will be determined by how well they are able to continue to do so over the long term.

The Japanese MMA fans are becoming cynical and the new company will be scrutinized carefully for anything that looks corrupt. This I believe is the reason for the creation of the Japanese MMA Association. It will attempt to provide legitimacy by association. It’s a gambit that may provide dividends if they can convince the public and maybe more importantly, a major television network, that this is a new “yakuza free” era in MMA. Or that at least that all such ties are buried so deeply underground that an embarrassing article series like that of Shukan Gendai on Pride, becomes an impossibility.

For the sake of the Japanese fans, I hope that WVR will succeed in bringing a replacement of Pride to the Japanese marketplace. For the sake of the sport, I hope that they can keep their skeletons in a well guarded closet.

Topics: Japan, Jeff Comstock, PRIDE, Yakuza | 7 Comments » | Permalink | Trackback |

7 Responses to “The Japanese MMA landscape is fraught with peril”

  1. David says:

    Interesting read, very interesting. Borderline brilliant 🙂

  2. Excellent work! I am passing it on to some friends who live in Japan to see what they think…

  3. That draws a very solid bow from PRIDE to WVR. Thumbs up, Jeff!

  4. Perhaps the irony is that the FBI likes to hire three kinds of people, accountants, lawyers, and military/police 😀

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