Japan’s Melco Admits Overcharging Government

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Japan’s top satellite manufacturer publicly admitted to and apologized Jan. 27 for overcharging the government on a number of unspecified military and civilian contracts.

In a public statement, Mitsubishi Electric Corp. (Melco) of Tokyo apologized to Japan’s Ministry of Defense, Cabinet Office Satellite Intelligence Center and civilian Japan Aerospace Exploration Agency (JAXA). The Cabinet Office Satellite Intelligence Center manages Japan’s Information Gathering Satellite (IGS) constellation.

Melco said an internal audit triggered by inquiries from the three agencies had revealed evidence of overcharging. The press statement did not issue any details on the amounts involved, the work done or the number of contracts.

Melco, the prime contractor on most of Japan’s scientific satellites as well as the IGS system, manufactures space hardware at its Kamakura Works west of Tokyo. According the Ministry of Defense, Melco was the country’s No. 2 supplier of defense equipment in the fiscal year ending March 31, 2010, with sales to the ministry amounting to 101.6 billion yen ($1.3 billion). In addition to satellites, its products include missiles, radar systems and other equipment.

In a Jan. 27 statement, the Ministry of Defense said it had “temporarily” suspended dealings with Melco and would launch a broader probe of its contracts with the company.

In the late 1990s, Japan’s other major satellite builder, NEC Corp. of Tokyo, was temporarily barred from bidding on government contracts for similar reasons. Several senior executives with that company served jail time.

In its statement, Melco offered a “deep apology” for “the trouble” it had caused.