Kizuna Holdings (Osaka City), which had fallen into financial distress amid a scandal involving fraudulent claims for disability employment support benefits, announced on the 1st that the Osaka District Court has rejected its application under the Corporate Reorganization Act. The company also received a preservation and administration order prohibiting the disposal of assets prior to the commencement of bankruptcy proceedings. The company is expected to be liquidated, with total liabilities including affiliated companies reaching approximately ¥28.9 billion (approximately $182.5 million).
According to Teikoku Databank, Ltd and other sources, three of the four affiliated companies were also subject to similar preservation and administration orders. The remaining one filed for voluntary bankruptcy and likewise received a preservation and administration order.
According to the attorney serving as the preservation administrator, the rejection was based on the fact that a decision had been made to transfer the business to another company, making it impossible to formulate a reorganization plan.
Kizuna Holdings exploited the “retention support bonus” system at its four business offices under its umbrella, which provides additional benefits when disabled individuals work at general companies for six months or more. The company had been overbilling for bonus payments despite not actually meeting the requirements.
An audit conducted by Osaka City determined that the company had fraudulently received a total of approximately ¥15 billion (approximately $94.7 million) from municipalities across two prefectures and five prefectures. The city decided to revoke the designations of the four business offices.
The company had been the subject of a criminal complaint on suspicion of fraudulently receiving benefits. It filed for protection under the Corporate Reorganization Act in June, but the rejection has effectively closed the door on its rehabilitation.
According to Tokyo Shoko Research and other sources, total liabilities amount to approximately ¥29 billion (approximately $183.1 million), the largest ever for a social welfare service provider.
Regarding disability employment support benefits, fraudulent claims that deviate from the intent of the system have been uncovered in succession across various regions, and strengthening audit systems by local governments has become a pressing issue. This large-scale collapse is drawing attention from stakeholders from the perspective of ensuring the stable provision of disability support services, including the fate of the business transfer.
Note: Total liabilities are reported as approximately ¥28.9 billion by Teikoku Databank, Ltd and others, and approximately ¥29 billion by Tokyo Shoko Research and others.
AloJapan.com