Goodfellas, Japanese Style: Well Connected And 20% Legit

As he holds court in a hotel coffee shop, Shinobu Yoshitsune certainly looks the part of a gang boss. He's stocky; his hair is slicked back, and the tips of his pinkies have been sliced off--the trademark of Japan's yakuza, or gangsters. Two underlings hover around him, lighting his cigarettes, paying the bill.

But when Yoshitsune, 34, talks about his 38-member organization, he doesn't seem that different from an ordinary entrepreneur. He operates video stores and real estate and finance companies. He claims that half of his $1.5 million in annual income comes from purely legal activity. He scorns the drug trade. "We're getting to be more like corporations," he says. "We read the business press, and more members are college graduates."

GOLF CLUBS. Indeed, one of the most intriguing revelations of Japan's stock scandal was the web of ties between executives of Japan's top securities firms--Nomura Securities Co. and Nikko Securities Co.--and the yakuza. The brokerage executives bought some $29 million worth of golf club memberships from Susumu Ishii, retired leader of Inagawa-kai, Japan's third-largest yakuza family--perhaps to compensate him for losses. The brokerages are also under investigation for ramping up the share price of railroad company Tokyu Corp., of which Ishii owned 2.9 million shares, possibly to inflate the prices so the mobster could borrow more against them. The firms deny any wrongdoing.

Japanese investigators say the yakuza connection with the brokers is part of a broad move into legitimate business. No longer content to confine their activities to businesses at the margins of society, such as prostitution and gambling, the yakuza have been plowing their money into everything from golf courses to land and stocks. Police estimate that 20% of the annual yakuza income of $10 billion is now legit. "They've become deeply embedded in the economy," says Hiroshi Ishizuki, a director of criminal investigation at the National Police Agency.

The stock market is a major parking spot for yakuza loot. Brokers say that as much as $3.6 billion in yakuza money is in stocks. Trouble is, police say, the yakuza aren't always content to let the market take its course. They are said to plant spies in companies to get insider information for stock trades. "They're much more sophisticated now," says Kanehiro Hoshino, a criminologist at the National Research Institute of Police Science.

SELLING SEX. Of course, the yakuza haven't abandoned their core businesses. The 90,000 gangsters divided into more than 3,000 gangs control Japan's vast sex industry as well as such other mainstays as debt collection and extortion. A 1990 survey of 3,000 companies revealed that a stunning one-third paid the mobsters protection money.

As the yakuza come out of the closet, the government is starting to take a few shots at them. In May, the Diet passed an antiracketeering law enabling the police to haul in gangsters for trying to strong-arm people by flashing their maimed fingers or distinctive tattoos. The Diet is also likely to take up a money-laundering law in the current session.

But don't worry about the mob's survival. There are strong ties between the yakuza and the Establishment that go back at least to the late 1940s, when the gangs were used to keep radical leftists in line. Even now, politicians count on the local gang bosses to get out the votes. "Politicians depend on us for votes, and they do us favors," says yakuza boss Yoshitsune. He's confident those lofty connections will help keep the police off yakuza backs.

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