Tokyo Underworld

by Robert Whiting

  To get the 23 million yen in cash he so desperately needed, he was forced to borrow 34 million yen – the result of a standard three-month contract at 8 percent per month, the first installment of which the moneylender took off the top, along with a 5 percent orei, or ‘thank-you’ fee. As collateral, Nick was required to put up the title deeds to the building that housed his main restaurant and the property on which it stood. The requisite cash now in hand, he paid his tax bill and then returned to the Setagaya Trust Bank to get his loan, only to be rebuffed a second time. Officials now informed him that bank policy specifically prohibited granting anyone a loan to pay off a moneylender.

  Then he received a letter from the First National City Bank notifying him that a loan he had guaranteed some months earlier for a business acquaintance – a Chinese-American cookware executive in Tokyo named Chester Yep – was overdue. If he did not reimburse First National its 10 million yen immediately, the bank would seize Nick’s property. What this meant was that now he had to go back to the moneylender and ask for yet another emergency loan. This time he was charged an interest rate of 5 percent compounded every ten days. In all, it would cost him 18 million yen to get the 10 million needed to pay First National, and it would require him to mortgage even more of his assets.

  Nick paid off First National, but now he owed a total of 53 million to the moneylenders and the interest was snowballing. Over the next six months, he paid monthly installments reaching a total of 48 million yen, but because of the crippling accumulation of interest, his total debt to the moneylender ballooned to 133 million (over $400,000). Paying the moneylenders every month was sucking up all his incoming capital, and consequently he had been unable to pay other bills, which were now piling up. He had been neglecting his suppliers. He found himself in a very serious bind.

  If he had been smart, he acknowledged later, instead of merely stupid and greedy, he would have sold some of his property in the beginning to pay the original tax bill. He had more than enough to spare. In addition to the 170-tsubo (6,181-square-foot) plot of land on which his flagship restaurant stood, and his 275-tsubo (10,000-square-foot) main residence, there was the Atsugi factory, the fleet of four-ton trucks, the various other houses in and around the city, the cars, the yacht, the Hokkaido factory, the Hawaiian estate, and the smaller branch restaurants in the suburbs. There was also his newly opened pizza house near Roppongi Crossing, which encompassed the entire third floor of the six-story Hama Building next door to the elegant Seryna and which was doing a thundering business.

  It was at this particular juncture that a representative of Nihon Kotsu (Japan Transport) had approached with an offer of ‘help’. Nihon Kotsu (Japan Transport) was the largest taxi company in the city, with a fleet of 2,000 cabs. The representative had heard of Nick’s difficulties through a Japanese business consultant Nick had hired and proposed a joint venture between Nihon Kotsu and Nicola Enterprises to create a nationwide chain of restaurants under the Nicola logo. In return for a 70 percent interest in the venture, Nihon Kotsu would immediately pay off all the outstanding debt Nick owed to the moneylender, which by then, the summer of 1971, had swollen to 160 million yen. Nick would subsequently be allowed to reimburse Nihon Kotsu at the very reasonable rate of 8 percent annually.

  Nick did not care for the 70–30 percent arrangement, but he needed money instantly. He replied that he would agree to go along with the deal if Nihon Kotsu would throw in another loan of 63 million yen, on top of everything else.

  Done, said the NK executive.

  (And the devil take thy soul, he might well have added.)

  A joint venture was quickly set up and Nick was asked to sign an agreement promising to pay the 160 million yen by March 31, 1972, and the 63 million by December 31, 1972, with the land and building belonging to his main restaurant serving as security. The agreement was ‘just a formality’, an NK executive assured him. If for some reason he was unable to pay at deadline time, the date could be extended. ‘Don’t worry,’ one of the men said. ‘We’re partners. We’re in for the long run.’

  Indeed, the words ‘just a formality’ should have triggered internal alarm sirens. Especially in Japan, where the spirit of a contract was more important than the letter of it and multimillion-dollar deals were often concluded with just a handshake (or bow). At a fateful meeting attended on one side of the table by Nick and his ex-wife Yae, who was still an officer in Nicola Enterprises because of her holdings, and on the other, a dozen gray-suited Nihon Kotsu executives, accountants, and lawyers, Yae urged him not to sign. Although devastated by the divorce, she still cared enough about her ex-husband’s future to give him good advice. But Nick had ignored her and proceeded to put his signature on a document he could not read.

  What did a woman know of such matters, anyway?

  Nihon Kotsu quickly opened up a string of small Nicola’s around the metropolis, then, ninety days into the joint venture, management had a sudden change of heart. A store manager in the seaside resort of Ito, southwest of Tokyo, had taken the liberty of adding squid and fish to his pizza, which, in turn, had spoiled, and done damage to the gastrointestinal system of one customer. Nihon Kotsu management shortly thereafter advised Zappetti that the company did not wish to pursue the joint venture any further and gave him notice to be ready to pay off his debts totaling 223 million yen, 160 million of which was due in less than six months. There would be no further discussion.

  He sold one of his lesser Roppongi residential properties, for 120 million yen, with the idea that he would take advantage of a special bank system in effect in Japan whereby one could deposit 30 percent of the amount of a desired loan and borrow against it for the full 100 percent. But before he could do this the Nihon Kotsu executives somehow found out about the 120 million and demanded he immediately turn over the cash in his possession to them, which they had a legal right to do. He thought it curious they would make such a demand, thereby preventing him from going to the bank and immediately getting the full 223 million due them. But they insisted. So, after deducting 23 million yen to pay real estate broker’s fees and urgently outstanding bills, he turned over 97 million yen to Nihon Kotsu. This reduced the balance on the 160 million yen loan due March 31, 1972, to 63 million (160,000,000—97,000,000) plus interest. Adding the second Nihon Kotsu loan of 63 million yen, due December 31, 1972, plus interest, meant that he now owed a total of 156,000,000. (223,000,000—97,000,000 + 30,000,000 interest = 156,000,000.)

  In February 1972, just weeks from the March deadline, he decided to sell his Atsugi sausage factory. The buyer was the Higa family, connected to Domino’s Pizza, in the process of establishing a foothold in Tokyo – much to Nick’s dismay. The offer was 40 million yen, which, again, he could have taken to the bank and turned into 120 million yen. But Nihon Kotsu found out about that deal as well, somehow, and again demanded the cash. They had ears everywhere, it seemed. And he was forced to keep selling. He dumped the fur factory in Hokkaido. Then two more of his smaller houses and, finally, his prized home in the heart of Roppongi – moving to a house one-tenth the size and depositing his seven sets of living room furniture in storage. That put 120 million yen in the till. He refused to part with his hit pizza house near Roppongi Crossing, which was rapidly becoming his last refuge.

  Nihon Kotsu made him one final offer. They would give him a flat 215 million yen cash for everything. In return, they would cancel all debts and assume full ownership of his flagship restaurant, as well as the building and the land on which it stood. Take it or leave it, they said.

  Nick refused.

  Enough was enough, he said.

  It was time to make a stand. He was, after all, the Mafia Boss of Tokyo, he told friends.

  ‘They’ll never foreclose on me,’ he told a friend. ‘They wouldn’t dare.’

  Right.

  On April 1, the day after the first loan was due, the taxi monolith did indeed foreclose – and in a way no one expected. Nick arrived at his Gazembocho restaurant on that ch
illy spring morning to find fifteen rather big and very rough-visaged Japanese men occupying the main floor of his restaurant, glaring at him, and looking as if they expected trouble. They appeared to Nick to be members of the Sumiyoshi gang. And they were being directed by a Nihon Kotsu representative with the help of a government bureaucrat, who informed Nick that Nihon Kotsu had taken over the building and the land and was now running the restaurant, too – waiters and waitresses included. They could do this, the man explained, by virtue of something called daibutsu bensai, a Japanese law on the books which meant ‘taking property in lieu of cash’. It was legal, if not exactly customary, at least not that fast and not when the potential value of the property involved was exponentially higher than the cash owed.

  It was a hell of a way to learn a word, Nick would remark later. What it all meant was that the flagship Nicola’s, by then a Tokyo landmark and an operation that was grossing a million yen a day, was now under new management.

  TOKYO DISTRICT COURT

  It has been said that to file a suit in Japan is an act bordering on masochism. Under the Japanese system, there are no provisions for intensive criminal or civil trials as there are in the United States, where testimony is heard daily until the conclusion of the pleadings and discussions. If the participants are lucky, the plaintiff and the defendant might make one appearance in court a month. Usually, however, it is more like once every three or four months, because either side can delay matters by claiming illness, unavoidable absence from the country, or general inconvenience. The number of trial judges in Japan is far fewer than in the United States. Most judges preside over 300 cases at a time and are so overburdened with work that they find it impossible to move any faster. Although most simple cases of theft or assault might be adjudicated in half a year or less, the average run-of-the-mill civil case takes nearly two years on the average, and complicated ones take five or ten. Given appeals to the Higher Court and the Supreme Court, quite literally lifetimes can be spent in litigation.

  Apologists for the system claim it is deliberately kept slow to apply pressure on the parties to resolve the problem harmoniously out of court in negotiated settlements. The longer the court takes, the better the chances that the parties involved in the conflict will be forced to settle out of court, and therefore preserve social harmony, or wa, the desideratum of virtue in Japan. And indeed, a high percentage of cases are settled informally, often with the direct participation and encouragement of the judge (whose promotion in the judicial system is partially determined by the number of settlements he elicits in or out of court).

  However, a major unpleasant side effect of this system has been the involvement of the yakuza in civil disputes like those relating to traffic accidents or unpaid debts, ‘persuading’ reluctant parties to settle on the side, through effective use of the midnight knock on the door and other tools of intimidation. It is estimated that Japanese gangsters forcibly collect one-half of all the debts in Japan – a service that provides them with some 20 percent of their overall legal income.

  The legal profession does not have a long history in Japan. Before the Meiji era, there were no lawyers. Criminal and civil matters involving merchant and farmer classes were settled in the Court of the Feudal Lord by a prefect known as a bugyo. (Samurai, being a notch higher on the social scale, were exempt from such judgment.) Commoners considered the court an unfriendly and often frightening place, a feeling that has carried over somewhat into the modern day. When lawyers finally did appear on the scene, they were regarded as being in much the same category as geisha, yakuza and kisha (reporters), people to whom no self-respecting landlord would ever let a room. (Only judges and prosecutors, members of the elitist bureaucrat class who managed the country’s day-to-day affairs, commanded respect.)

  The status of lawyers began to change with the institution of a new postwar system – and a very difficult bar exam. But even so, few people put much stock in lawsuits. Many Japanese pointed to a famous case involving the aforementioned greenmailer Hideki Yokoi, victim of the first postwar mob ‘contract’ shooting, as one very good reason why. In 1950, Yokoi had borrowed a large sum of money from an aristocrat who went by the title of the Duke Hachisuka – a distant member of the Imperial Family – and refused to return the money. Yokoi was sued and ordered by a district court to pay. He appealed to a higher court and lost. Then he appealed to the Supreme Court, which also ruled against him in 1958. Still, he refused to pay. Yokoi took advantage of a Japanese law that does not obligate the defendant in a debt settlement suit to pay if he has no money in his name. Yokoi, an extremely wealthy man who owned a department store and a leisure shipping line, simply had all his assets transferred to his wife’s name, effectively voiding the court’s verdict.

  Yokoi’s outrageous behavior led to the pistol attack on him in 1958, ordered by yakuza boss Noboru Ando, who had been asked to intercede in the matter by a friend of the Duke’s family. It may have been the first attempt in history by a member of the aristocracy to use the mob as a collection agency. Yokoi survived the attack, despite taking a .32 caliber bullet in the lung, to become even wealthier. Ando, as seen earlier, emerged from prison to become a movie star, his first film Chi to Okite (Blood and Law) reenacting the attack on Yokoi. But no one from the Duke’s family ever saw any of the money.

  At the time of the Nihon Kotsu takeover, Japan had roughly 10,000 lawyers, compared to the United States’s half a million. (By the end of the century, the figures would be 15,000 and 780,000.) The system was set up so that only about 600 people a year, or 3 percent of the 23,000 Japanese who annually applied, were able to pass the rigorous bar exam to win a place at the Legal Training and Research Institute, the state-run training facility for attorneys. Of those who passed, two-thirds became practicing lawyers; the rest became prosecutors or judges.

  Because of all this most disputes between Japanese businesses never go to court in the first place – the parties instead referring to published guides to determine negligence and calculate damages. And that is how many Japanese believe it should be. To them, the American adversarial system where people routinely sue each other, often over trivial matters, is simply insane – it is unpleasant, expensive and unnecessary.

  Zappetti’s lawyers initially advised their client to try for a cash settlement – to see whether Nihon Kotsu’s previous offer of 215 million was still on the table – and save himself a lot of grief. That way, at least, he would be debt free, with a large injection of cash in his bank account, and he would still have his booming Roppongi Crossing branch.

  ‘Give up your name. Give up your trademark,’ they urged. ‘Take the money and start over again.’

  Nick adamantly refused.

  ‘Why doesn’t Nihon Kotsu give up my name and my trademark and start over again?’ he said. ‘They’re the ones with all the money.’

  The lawyers tried reasoning with Nihon Kotsu. They argued that what the company had done was not necessarily 100 percent in accordance with the law, even given the validity of daibutsu bensai, because there had been no sales contract – no bai-baikeiyaku, in the parlance – and because there was no bai-baikeiyaku, Nihon Kotsu did not have the right to touch the restaurant, Nicola’s staff, or the company logo. Legally, they were only entitled to the land and the building. Even then, propriety dictated offering Zappetti a rental agreement so he could continue to run his business.

  The lawyers elicited a vague promise from a Nihon Kotsu official that the company would give Zappetti one more chance to somehow pony up the money he owed, and if he could do that, the executive said, the company would relinquish the property in full and put an end to the matter.

  In desperation, Zappetti went back to see the original moneylender – the one who had started his vertiginous descent into debtor’s hell with the original package of 34 million yen – and proposed a deal whereby the lender would pay off the entire Nihon Kotsu debt, which had now grown to 265 million yen, in one fell swoop, and assume 50 percent of the property
in question. Zappetti would continue to run his business and at some future mutually agreed on date they would sell the land and split the profits.

  The moneylender agreed and supplied a check, which Zappetti carried to the head offices of Nihon Kotsu in Akasaka, a new corporate tower of steel and glass. But there he could not find anyone to take the check from him. No one would even acknowledge knowing him. Finally, a security guard asked him to leave.

  So much for Plan B.

  In a rage, Zappetti called East Harlem. He hired two men to fly to Tokyo and ‘do a job’ for him and wired a $4,500 advance for air tickets. The day before the men were scheduled to fly in, however, Zappetti’s lawyers discovered that Nihon Kotsu had already reregistered ownership of the land and the building at the property registration office under the Nihon Kotsu name and had also transferred the title deed of the restaurant to one of their development companies: Nikko Kaihatsu. They had even used the Nicola Enterprises company seal to do it, with the help of a turncoat within his organization.

  His business was now firmly in the grip of enemy hands. They had even raised the salaries of his staff – or rather what was now his former staff – to keep them from quitting. Nothing any gangster – foreign or Japanese – could do would change that or help him get his property back now.

  ‘Sue us’ was essentially what the folks at Nihon Kotsu were saying.

  So he switched his headquarters to his Roppongi Crossing branch, renamed it ‘Nicola,’ and decided to take up the challenge.

  Nick saw parallels between his situation and that of the Tokyo Hilton Hotel in 1967, in a case that garnered much notoriety – and actually turned out favorably for the international hotel management chain. In 1963, the Hilton had signed a twenty-year contract to manage a hotel in Akasaka built and owned by the Tokyu Hotel chain of Japan. Four years later, however, Tokyu decided to stop paying Hilton’s management fee and assume management of the hotel themselves. One day when the Hilton representatives were away at lunch, Tokyu executives walked into the hotel offices and installed their own manager. When the Hilton men returned that afternoon, they found that they and their staff had been ejected, their desks and office furniture moved into the parking lot, and a cloth sign hung over the entrance to the hotel bearing the Tokyu name. The Hilton men were physically barred from reentering the premises.