Historic Ibaraki Natto Producer Fallen Prey to Fraud

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The historic natto manufacturer Kinzakura Foods is located in Ibaraki Prefecture. It employs about 50 people and produces 5 million packages of natto per month.

Yukio Nagata (61), the president of Kinzakura Foods.

President Yukio Nagata of Kinzakura Foods: “Whether customers become repeat buyers largely depends on the taste. We have confidence in our product.”

However, last year the company faced a serious crisis.

Kinzakura Foods President Yukio Nagata: “At its worst, sales dropped by 40 percent. It was tough. Continuing operations would have inevitably led to the company’s bankruptcy.”

What exactly happened?

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President Nagata also had trouble finding a successor and decided on a merger and acquisition. He sold the company to another company that took over management.

Yukio Nagata, president of Kinzakura Foods: “I wanted to keep the business local, and the best way to achieve that was to partner with a capable company that still had solid foundations.”

A large brokerage firm recommended an investment company called Lucian Holdings. The company was described as having a diverse management team and about 30 subsidiaries.

This photo is from the day the M&A was completed last March. President Nagata is pictured with the CEO and director of Lucian Holdings. At that time…

Yukio Nagata, president of Kinzakura Foods: “My biggest hope was that the company would grow steadily in line with the contract.”

But immediately after the transfer of management…

Kinzakura Foods President Yukio Nagata: “At first I was furious. It was not up to par with the promises they made and their actions were haphazard. Including financial matters, it was unacceptable. I was very upset.”

Lucian Holdings showed little interest in managing natto production. Their first directive was to transfer about 35 million yen from Kinzakura Foods’ account to Lucian’s.

In addition, part of Kinzakura Foods’ monthly revenue was also reportedly sent to Lucian, and…

Yukio Nagata, president of Kinzakura Foods: “Employees’ salaries were delayed and social insurance and taxes were not paid.”

Kimura, the factory manager who has worked in natto production for 30 years, said he didn’t understand what was happening.

Factory manager Kimura: “It came like a bolt from the blue, completely unexpected. We were all filled with fear for the future.”

Ultimately, the CEO and director of Lucian Holdings could no longer be reached and their whereabouts were unknown.

As a result, the 36 million yen that should have been paid to President Nagata at the time of the contract was never paid. Responsibility for the company’s loan guarantees, which were to be transferred to Lucian, remained with President Nagata.

Eventually, President Nagata bought back the shares and returned as president. With the help of local banks and business partners, he managed to rebuild the company.

Yukio Nagata, president of Kinzakura Foods: “It took about a year to normalize operations by liquidating assets and improving cash flow through measures such as paying out my life insurance.”

What were the real intentions of Lucian Holdings? We managed to get in touch with a current director (30) of Lucian Holdings.

Lucian Holdings, current director: “This is the main room where documents and materials are stored.”

This was the headquarters of Lucian Holdings, located in a small office in a multi-tenant building in Ibaraki Prefecture. Now it is littered with scattered invoices.

Lucian Holdings, current director: “There are simply too many bills for things like telephone, electricity and taxes.”

This executive, who was photographed with President Nagata at the signing ceremony, claims he was tasked with arranging transfers of acquired companies. He only held a titular role.

Lucian Holdings Current Director: “This is my business card from when I was supposedly working at Kinzakura Foods. There were many cases where people were given management positions without actually holding a real position.”

Lucian Holdings was controlled by the CEO and the director, while the executives alleged that they were abused.

Lucian Holdings Current Director: “I had no idea what tasks I would be given or what the outcomes would be. I wondered why I was being photographed next to the former president.”

In about two years, Lucian Holdings acquired 37 companies, focusing on companies with significant deposits.

Lucian Holdings, current CEO: “The CEO was always looking for new companies to buy. He would say, ‘We’ve acquired this one, we’ve acquired that one.’ They were basically just lining their own pockets…”