Broken Lives
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"I am not just worried about the future," says Teruko Arai, 69, whose candy and dried food business is only 30 percent what it was in the 1980s. "I am worried about right now."
Page Two

Success Gone Sour
Continued from preceding page

In many ways, the life story of Masaaki Kobayashi is the story of Japan since World War II. He rose from poverty to ostentatious wealth and then fell from a mountain of debt.

Kobayashi, like modern Japan, was born amid the smoldering embers of the war. It was 1947, and Kobayashi's father, Shoichi, who came from generations of rice farmers, had just returned from selling vegetables to Japanese troops occupying Manchuria. When Japan was vanquished at the end of the war, the father had joined the sad procession back to his devastated homeland.

The elder Kobayashi raised his son and daughter in a rented room in the bombed-out ruins of Tokyo, where poverty was rampant and the family frequently had no money for electricity. Kobayashi raised goats, and Masaaki was up each morning before dawn to milk them and deliver the milk before school.

Kobayashi said he believes poverty motivated his son. Masaaki was forced to quit school at 16 to help with the goats, but soon he left to find something better. "I'm a simple person, and farming has always been my life," said the elder Kobayashi, who now tends cows on a small farm in the bamboo-forested hills east of Tokyo. "But my son – I was starting to see that he was a leader, and he could get people to do what he wanted them to do. Each person has his own special capacity. Mine is to be punctual and faithful, and his was to be something big."

In the mid-1960s, when the wizards at Sony had perfected transistor radios and such industrial giants as Toyota and Honda were gearing up to dazzle the world, young Masaaki Kobayashi found his place on the edge of the revolution. By 1973, he started a business selling auto parts in what was fast becoming the world's vanguard car industry.

Auto Spot grew from a small storefront in which Kobayashi worked and slept to a chain of 17 stores that employed more than 145 people. It had sales of more than $60 million a year. Kobayashi swooshed into the boom years of the 1980s like a surfer riding a huge wave. He was making a fortune, and, like everyone else in a nation that seemed almost drunk with wealth, he spent it in showy ways.

He bought racehorses, including Ines Fujin, which won the 1990 Japan Derby, the premier horse race here, similar in prestige to the Kentucky Derby. The first-prize purse was nearly $1 million, and it made Kobayashi officially a player in Japanese high society.

Photos taken that day show Kobayashi wearing a wreath of fresh flowers as two other men stood close by his side: Shoji and Sudoh. The three had met more than 20 years earlier when they were all eager young men looking to make their mark in Tokyo's car industry.

According to friends and associates, the three became like family. It is not uncommon in Japan for business friendships to be closer than marriages; young businessmen, especially those of Kobayashi, Sudoh and Shoji's generation, often spend far more time at work than at home.

The three young entrepreneurs, united by their passion for cars and sales success, golfed and drank together, sang karaoke and played mah-jongg, gambled and lived together as a nearly inseparable threesome as their businesses flourished.

But shortly after Kobayashi's racehorse was crowned in the winner's circle in 1990, things began changing in Japan. The intoxication of the country's "bubble economy" was giving way to a painful morning after. Sky-high land prices fell back to as low as 30 percent of their former value. Banks that had lent billions suddenly were left in the lurch as real estate speculators went broke.

Kobayashi again found himself mirroring his country's fortunes. His success and taste of the high life made him keep looking for splashy big scores. He tried new car accessories, looking for that one hot product to strike it rich. Like the Japanese magnates buying up Rockefeller Center and Pebble Beach, Kobayashi wanted trophies, status, impact. Nothing panned out.

A large part of his problem was increased competition. Japan in the 1990s has been slowly dragged into the global free-market economy. Car owners in Japan now don't have to go to Kobayashi's store to get seat cushions but can order them on the Internet and from foreign mail-order catalogues. At the same time, trimming costs to compete often means trimming staff, and that is hard to do in Japan, where loyalty to company often has been treasured more than loyalty to one's spouse.

Lawyers say Shoji and Sudoh begged Kobayashi to stop "throwing his money away," that he was spending too excessively, but he ignored them. And his troubles soon became theirs.

Kobayashi, Sudoh and Shoji operated their businesses in the traditional "Asian Way," in which friendly personal ties were more important than the bloodless Western system of credit checks and bottom lines. Banks and companies here have lent colossal sums of money, not because they scrutinized business plans and accounting books, but because of school or family ties.

In hard times, it's a messy system. One Japanese bankruptcy often means many friends and related businesses are dragged down too. When Kobayashi's business – selling leather steering-wheel covers, funky fluorescent lighting and other accessories – got into trouble, he did what was natural here. He turned to his buddies, Shoji and Sudoh. Kobayashi had helped them get started in business and been their mentor; now they, by custom, had little choice but to help the man who had helped them. They bailed out Kobayashi, to the point where they were hollowing out their own companies' reserves. According to lawyers now sifting through the wreckage, Shoji had floated $650,000 to Kobayashi, and Sudoh had quietly passed him $225,000.

Sharing the Burden

The loans were not entirely acts of charity; Shoji and Sudoh relied heavily on Kobayashi's stores to move their products. Their businesses were small fish riding the wake of Kobayashi's big-league success; if he failed, they could go down too.

Like Kobayashi, one of Japan's main problems is debt – and the accounting practices that hide it. Because of accounting methods that mask actual debt, problems in banks and companies here often have been allowed to balloon to gargantuan proportions before anyone realizes.

The lawyers assigned to liquidate Kobayashi's business say that his books were also unclear and that the extent of his problems was hidden from his business associates. None of it was evident in any systematic accounting trail, and it only came to light after their deaths.

It was Kobayashi's deep feeling of "responsibility" to his employees that he wrote about in his dying notes, his lawyers said. He said he was "going to die so that his company would live." His life insurance payouts were to make up for his mismanagement. Then, because of his mistakes, nobody would lose his job.

"Why did he do it?" Sudoh's mother considered one day recently outside her home. "I have asked that question myself. ... I have been told he felt responsibility to his own company, to his employees, that he felt so indebted to Mr. Kobayashi."

Sudoh's friends said he was talking more and more often about how "the business world was changing too fast" for him. According to one television news account, one of Sudoh's notes said: "The [business] system we learned is no longer valid."

If Japan's bankruptcy laws were not so harsh, so unforgiving, maybe this wouldn't have happened, five lawyers connected to the suicides agreed. It has been nearly impossible to get a bank loan to start up a business unless one's home or that of a relative is placed on the line as collateral. In the United States, a much thicker line is drawn between personal and business risk.

Attorney Itoh said: "Entrepreneurs know if they fail, they lose everything. If Japan doesn't limit personal liability in company bankruptcies it cannot nurture the entrepreneurial spirit it needs to survive. ... Your whole personal life is wiped out if your business fails."

In the end, only Sudoh's company survived.

On the day they died, the three men drove to Kunitachi, about 20 miles west of Tokyo. There they huddled together in the anonymity of a tiny restaurant inside a convenience store on a busy street. Employees there recall that the three men talked seriously at a table near the front window, between stacks of cigarette cartons piled against a beer cooler and a half-dead potted plant. Their lunch was rubbery boiled beef and onions over rice, served with a view of two trash cans.

After eating, they walked next door to the Hotel le Piano, a classic Japanese "love hotel," where trysting couples find a cheap, discreet rendezvous spot in the anonymity of a drab Tokyo suburb.

In the faux marble lobby, next to a white grand piano trimmed in gold, the men booked their rooms from a clerk hidden behind frosted glass. Payment – $55 for an eight-hour stay – and three room keys passed through a tiny slot.

Among them, they scribbled more than a dozen notes, apologizing that this was the only way to help their families from losing everything and to keep their companies going. That very day, Kobayashi changed his life insurance policy so that more than $1.5 million that was slated for his wife would go to his company. If he kept the company going, his family would be okay. But if the company went bankrupt, creditors would take his home, their cars, his horses, his bankbook.

Sometime after 4 p.m. on that cold, rainy Wednesday, the men adjourned to their rooms. Then, in the depressing fakery of a gilded flophouse, three friends who once had it all tossed nooses over ceiling heating ducts, kicked the chairs out from under themselves and dropped a few violent inches to their deaths.

Special correspondent Shigehiko Togo and researcher Akiko Yamamoto contributed to this report.

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© Copyright 1998 The Washington Post Company

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