Mitsubishi Electric Corp. has been banned from bidding on contracts awarded by three government agencies following allegations of overbilling.
A major supplier of defense and space equipment, Mitsubishi Electric has apparently been padding invoices for years.
The company will be banned from participating in bidding for future orders until it implements measures to prevent a recurrence.
The temporary ban on bidding for contracts was announced Jan. 27 by the Defense Ministry, the Cabinet Satellite Intelligence Center and the Japan Aerospace Exploration Agency (JAXA).
In addition, the Defense Ministry will initiate a special investigation into the scandal from Jan. 30.
Mitsubishi Electric has been found to have padded invoices for at least two defense-related projects. One involves the production of a spy satellite commissioned by the Cabinet Satellite Intelligence Center for a total cost of about 240 billion yen ($3.1 billion) between fiscal 2002 and 2011. The other is for the design of medium-range surface-to-air guided missiles commissioned by the Defense Ministry for 33.6 billion yen in fiscal 2009.
In both cases, Mitsubishi Electric inflated the costs of the projects that are calculated by multiplying the number of workers involved with the man-hours worked.
It remains unclear by what amount the company inflated the costs, according to sources.
Mitsubishi Electric also inflated the amount received from JAXA after fiscal 2003 for the production of satellites and the HTV unmanned cargo transporter. While the company received about 320 billion yen for those projects, the excess claimed by the company is still unknown.
According to Defense Ministry sources, the questionable accounting was uncovered at the company's Kamakura Works.
Last autumn, Defense Ministry officials received information that Mitsubishi Electric was using different figures to calculate costs.
Along with the Cabinet Satellite Intelligence Center, Defense Ministry officials began an investigation from Jan. 17 that involved checking documents and questioning workers. That led to discrepancies in the invoices with the actual work carried out.
Sources said Mitsubishi Electric workers were told by their superiors to input the figures used in the invoices, leading Defense Ministry officials to suspect an organized attempt to inflate costs.
During the Defense Ministry's special investigation Mitsubishi Electric will be prohibited from taking part in projects until it returns the inflated amounts paid and submits reports of measures it will take to prevent a recurrence.
Mitsubishi Electric is the second largest defense contractor behind Mitsubishi Heavy Industries Ltd. In fiscal 2010, Mitsubishi Electric received 101.6 billion yen in orders from the Defense Ministry. It has been involved in the development and production of missiles and radar systems.
It has also been selected to take part in licensed production of the electrical systems to be used in the next-generation F-35 fighter jet for the Air Self-Defense Force.
Because Mitsubishi Electric is also involved in the development of satellites, the overbilling incident will likely affect that sector as well.
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