Niigata Minamata Disease and Showa Denko

Disclosure of Compensation in an Environmental Pollution Case

Kazumasa TAKEMORI

Chubu University

Contact and Data availability

Abstract

Japan experienced serious damages of environmental pollution so-called “Kogai” in 1950s and 1960s. Niigata Minamata Disease is one of them, an organic mercury intoxication, which has prevailed in Niigata Prefecture. Many patients have suffered from this disease until today, and some of them died of it. This disease was caused by discharged drain of Kanose Factory of Showa Denko which included methyl mercury as by-product of acetaldehyde produced in terms of limestone processing technology. Methyl mercury was condensed in food chain of plankton, aquatic insects and fish of the river and was eaten by many people and made Niigata Minamata Disease patients. Some of them presented the case to Niigata District Court in 1967 and won the case in 1971. After their second institution they got compromise with Showa Denko and have received formal medical care of Niigata Prefecture since then.

Two methodical steps are taken in this research: one by historical examination of Niigata Minamata Disease in physical accounting approach and the other by examination of disclosure of compensation in annual reports in external environmental accounting approach.

Conclusions are:

a) Victim patients once spent normal lives but had suffered from miserable disaster of the disease. Their geographical distribution is wide along the Agano River. Compensation to them was not paid at all until the court decision of Niigata District Court.

b) Showa Denko has denied any involvement and responsibility on Niigata Minamata Disease until today. It mentioned its opinions on Niigata Minamata Disease adding special descriptions in annual reports titled as, “The Case of Methyl Mercury Intoxication around the Agano River and Court Appeal by Local People.” Discharged wastewater and drain were the result of its wrong plant operation against material flow cost accounting.

c) Compensations amounted ¥26,886 in total of 26 years were disclosed in sections of non operational actions or outside management policies: Section of Decrease of Deferred Profit Surplus, Section of Statement of Surplus and Section of Special Loss, in response to changes of Regulation of Financial Statements of Japan Financial Services Agency.

Significance of Niigata Minamata Disease in Japanese Environmental Pollution history

In Japan, the years, 1960s, are the period of pollution court judges:typical of them are the court for Yokkaichi in Mie Prefecture, the court for Itai-itai Disease in Toyama Prefecture, the court for Minamata Disease in Kumamoto Prefecture and the court for Niigata Minamata Disease in Niigata Prefecture. All of them are industrial disasters caused by neglected downstream processes of production. Many local people suffered from the disease and several of them died.Victim patients got win at court on account of the Principle of Polluter’s Cost.

Itai-itai Disease and two Minamata Diseases described above were heavy metal intoxication, the reason of which were careless management of production facilities. It is important that there has Disease and Kumamoto Minamata Disease. Niigata Minamata Disease has scarcely been recognized among general people although methyl mercury was their common causal substance, by-product of acetaldehyde.

Japanese companies and government changed their environmental policies and realized anti- pollution facilities experiencing lost cases of pollution courts. National government established new laws at pollution. However experiences of Japanese pollution have been changing from real knowledge of victim people to historical information in books and webs. In this situation, information of causal companies has been left from study and re-examination and victim patients have been less and less understood. As a result, pollution history will be forgotten and negative aspects of new technologies may bring us new pollution cases.

We will discuss how compensation and reserve changed in relation to Niigata Minamata Disease

Niigata Minamata Disease and Showa Denko

The term, “Niigata Minamata Disease,” is formally adopted by Niigata Prefecture . Niigata Minamata Disease is a Minamata Disease caused in Niigata Prefecture. Niigata Prefecture defines Minamata Disease is “a nervous disease with the nature of intoxication by eating fish contaminated by organic mercury repeatedly and continuously.” The name of this disease is called in various names as, a) “nervous disease,” b) “organic mercury intoxication,” c) “the Second Minamata Disease.” Showa Denko has consistently called “Organic Mercury Intoxication around the Agano River” except “Niigata Minamata Disease” in the annual report of 2011.

Niigata Minamata Disease is a nervous trouble caused by methyl mercury which has been flown

from Kanose Factory of Showa Denko located at 67km upstream of the Agano River for 30 years

since 1926. This substance is to bring total human nervous trouble and brain trouble and patients

often died. It was especially produced in huge quantity since 1960, and people were caught of

Minamata Disease by eating carp, mullet, dace and eel contaminated in condensed food chain of the

Agano River .

Niigata Minamata Disease is incurable disease which starts from feeling languid and narrow field of vision, tremulous hands and feet, next, brain trouble and damage with tragedies of death in wild appearance and extreme gruesome attitude. As it has been incurable, many patients have still suffered from it for many years.

Victim patients of Niigata Minamata disease stood for the first pollution lawsuit in Japan with helps of lawyers, nationwide support staffs and prefecture officers.

Involvement of Showa Denko in Niigata Minamata Disease

Masao Anzai chaired as the president of Showa Denko while it produced huge quantity of acetaldehyde and patients of Niigata Minamata Disease presented a case to Niigata District Court. Anzai was a double graduate of school of economics and law school of Tokyo University. Contrarily, top managements of the other new chemical companies graduated from college of engineering. Such different background suggests us his predisposition and the company itself, looking the production facilities as the source of profitability but not taking care of modern technologies both in positive and negative aspects..

As its first impression is said to be “management by sweet-potato vines ,” its management style was expanding profit resources by developing new product lines which were not within business territories of traditional financial combines (zaibatsu ) on account of a business risk of new technologies[Kaisha Shiki Ho, June 1926, the 11th year of Showa.]. Nobuteru Mori, the founder of Showa Denko, at first built a company extracting iodine from sea tangle, and then built the next company, Showa Denko, producing nitrogenious fertilizer made from limestone. He produced acetaldehyde from acetylene extending the production process of the fertilizer and realized a comprehensive chemical company supplying wide range of products [Walking of Showa Denko, Public Relations Room, General Affairs Department, Showa Denko]. Furthermore he succeeded in technological challenge to produce the first Japanese aluminum .

Methyl mercury was produced as by-product of acetaldehyde, and it was discharged into the Agano River without any processing to exclude hazardous substances. Methyl mercury was condensed in biological food chain in the Agano River. People living around the Agano River were fish eaters and were the last of food chain and material flow of methyl mercury[Niigata Prefecture, p.15]. The reason why river fishes were taken by the local people for daily foods is said to be as the Agano River was the fundamental base of all aspects of people’s life which offered water for kitchen and bath, traffic routes and places for fishery .

Niigata Prefecture published the existence of Niigata Mianmata Disease as the occurrence of organic mercury intoxication around the Agano River on June 12, 1965. This quick response of the prefecture was evaluated to be effective.

Lawsuit was held under such background. The plaintiffs, three families and 13 people presented a case at the Niigata District Court on June 12, 1967. This is called the first instituting. They got decision of win in 1971. But 94 plaintiff people presented the second instituting at the Niigata District Court in 1982. All cases got compromise with Showa Denko in 2006. They spent four years and three months for the first lawsuit and 13 years and nine months for the second lawsuit. In total, they spent 31 years and four months from recognition of the first Niigata Minamata patients to the final compromise.

Characteristics of Financial Statements

Annual reports of Showa Denko were examined from the 39th Period(ended in June, 1961) when

it began producing huge quantity of methyl mercury to the 88th Period(ended in December, 2006)

when three years had passed since the final compromise with patients at the second lawsuit. Its

financial statements were analyzed on compensation disclosure in balance sheets and profit and loss

statements for 51 periods or 37 years.

It is noticeable that forms and systems of financial statements were often changed by several versions of Financial Statement Regulation issued by the Japan Ministry of Finance or Japan Financial Services Agency. The biggest change is their period length for the settlement of accounts:six months settlement were normal until the 66th Period (ended in December, 1974, the 49th year of Showa), but one year period has been normal since the 67th Period(ended in December, 1975, the 50th year of Showa). Surplus Disposal Statement (Joyokin Shobun Keisan Sho) or Loss Process Statement (Kessonkin Shori Keisan Sho) was abolished and matters disclosed in those statements were to be noted in the Section of Special Profit (Tokubetu Rieki no Bu) or the Section of Special Loss (Tokubetu Sonshitsu no Bu) which were added in a new profit and loss statement form. Accordingly compensation in relation to Niigata Minamata Disease were to be noted in the Section of Special Loss) since the 67th Period.

Otherwise, new regulation introduced a new form on profit and loss statement, defining Current Profit (Keijo Rieki) or Current Loss (Keijo Sonshitu) adding Operating Profit and Non-operating Income (Eigyo Gai Shueki) deducted from Non-operating Cost (Eigyo Gai Hiyo) and abolishing traditionally used Gross Profit(or Gross Loss) (Toki So Rieki, or Toki So Sonshitsu) adding Operating Profit(Eigyo Rieki) and Non- operating Income and also abolishing Net Profit (Toki Jun Rieki ) deducting Non-operating Cost from Gross Profit. Net Profit (Toki Mishobun Rieki) or Net Loss (Toki Mishori Kesson Kin ) was newly defined as the base of calculating dividends and Profit Reserve(Toki Rieki Junbi Kin), on the other hand Net Profit Resereve(Toki Mishobun Rieki Joyokin ) in Surplus Treated Statement(Joyo Kin Shobun Keisansho) was abolished.

Phase One

This phase covers 39th-59th Periods:1960-1970, the 39th year to 45th year of Showa.

Sales increased 381% for those ten years from \670million (total of the first and second period of 1961, the 36th year of Showa) to \166,480million (total of the second period of 1970, the 45th year of Showa, and the first term of 1971,the 46th year of Showa). A special opinion was described in Part 3 “Miscellaneous” of its 51st Annual Report (June, 1967 Period, the 42nd year of Showa) persisting that its discharged wastewater had any relation with the Case of Mercury Intoxication around the mouth of the Agano River, as Showa Denko was instituted on Niigata Minamata Disease by the people living around the Agano River in June 1967, the 42nd year of Showa. Masao Anzai had taken his office as the president, but he persisted that he was ignorant of mechanism of the disease at the court. Anzai retired his position of president at the board of directors after the 59th stockholders meeting held in September 1971, the 46th year of Showa, and Haruo Suzuki replaced as the new president.

Phase Two

This phase covers the 60th- the 66th Periods:1971-1974, the 46th to 49th years of Showa.

This phase is special in the lost case at the Niigata District Court. And six months settlement of accounts finishes.

In the Annual Report of the 60th Period(ended December 1971, the 46th year of Showa）formal announcement about lost case at the Niigata District Court was specially added under the title of “Comment on the Case of Claim for Damages in the Case of Mercury Intoxication around the Agano River ” explaining that the company was lost at the case and the lawsuit terminated with waiving the right of appeal.

Compensation for the damages of plaintiffs based on the lost case was disclosed as follows:

1. the 60th Period “8.Compensation for the Case of Organic Mercury Intoxication of the Agano River” \278million. This is described in the Fourth Section, Decrease of Deferred Profit Reserve(Kurikoshi Rieki Joyokin Gensho Daka) in Surplus Statement (Joyo kin Keisan Sho)（same statements, below）.

2. the 61st Period no description

3. the 62nd Period no description

4. the 63rd Period “Compensation for Organic Mercury Intoxication ” \3,635 million. In this term “Unprocessed Profit” (Toki Mishobun Rieki) is minus and no dividends on account

of “Net Loss” (Toki Jun Sonshitu ) , not “Net Profit” (Toki Jun Rieki ). This Compensation (3.5% sales ratio) was not main reason of no devidends.

5. the 64th Period “Compensation for Organic Mercury” \588million（Total payment of both the 63rd and 64th Periods, in the year 1973, the 48th year of Showa, is \4,223million）

5. the 65th Period “Compensation for Organic Mercury” \961million

6. the 66th Period “Compensation for Organic Mercury” \819 million（Total payment of both the 65th and 66th Periods, in the year 1974, the 49th year of Showa, is \1,780million） The 66th Period is the last Period of six months settlement of accounts.

Phase Three

This phase covers the 67th- the 81st Periods:1975-1989, the 50th year of Showa to first year of Heisei. This phase is special in new Financial Statement Regulation nd the last periods treating a single compensation for Niigata Minamata Disease.

Its disclosure style is almost same with the second phase of Compensation in relation to Niigata Minamata Disease, but it was described as “4.Compensation for Organic Mercury Intoxication” in the Section of “VII Special Loss” of Profit and Loss Statement following the form of new Financial Statements Regulation, while it used to be an item in Surplus Statement (Joyo Kin Keisan Sho). Total sum of the compensation is ¥15,510million for those 15 terms or 15 years, amounting 0.2 to 0.3% sales ratio in an average. Tadao Tsubaki chaired the judgment committee for official recognition of Niigata Minamata Disease patients and he worried influence of compensation payment on management, but this small sales ratios denies his anxiety.