The 7 Biggest Corporate Scandals in Japan

The 7 Biggest Corporate Scandals in Japan

by Dave McCombs

July 21, 2015 — 10:38 AM SGT

Toshiba Corp.’s $1.2 billion accounting scandal, caused by top executives setting unrealistic profit targets, ranks among the largest for Japanese companies. An industrial group that makes everything from nuclear reactors to microchips and home appliances, Toshiba said Monday it must correct profit over more than six years, the biggest such adjustment since Olympus Corp.’s $1.7 billion accounting scandal in 2011. No charges have been filed against Toshiba or its executives in the case. Here is a list of the biggest accounting scandals in Japan.

  1. 1998: In a case that unnerved global financial investors, Long-Term Credit Bank of Japan underestimated bad loan reserves by $4 billion. Three executives were convicted on fraud charges, a ruling overturned by the country’s Supreme Court in 2008. The highest court ruled the three were justified in using old accounting rules. The bank was sold to a group of investors in 2000.
  1. 1997: Yamaichi Securities Co. went bankrupt after reporting a $2.5 billion deficit it had previously hidden by shunting client losses into paper companies. Former President Atsuo Miki and former Chairman Tsugio Yukihira were each sentenced to two-and-a-half years in prison.
  2. 2011: Olympus Corp. usedfraudulent takeoversto hide $1.7 billion in losses over 13 years, starting in the 1990s. Former chairman Tsuyoshi Kikukawa and two other erstwhile executives pleaded guilty in September 2012 for covering up losses. Olympus was fined 700 million yen ($5.6 million), and the three officials received suspended sentences from the Tokyo District Court. Nobumasa Yokoo, an adviser to the company,received a four-year jail term on July 1, 2015.
  3. 2005: Kanebo Ltd., a cosmetics maker, had to restate earnings for four of the five years through March 2004. The restatements raised questions about their auditors including ChuoAoyama Audit Corp. and its venture with PricewaterhouseCoopers LLP. The company said it inflated earnings by about 210 billion yen over five years. Former President Takashi Hoashi received a suspended prison term, as did former Vice President Takashi Miyahara. A third executive Kazutoshi Kanda, also received a suspended term.
  1. 2006: Nikko Cordial Corp. padded profit through an issuance of convertible bonds to affiliate Nikko Principle Investment Japan. The country’s third-largest brokerage at the time was accused of padding profit by 13.7 billion yen for the three months ended September, 2004. The brokerage was sold to Citigroup Inc. in 2007.
  2. 2007: IHI Corp., Japan’s third-largest maker of heavy machinery, corrected earnings for the year ended March 31, 2007, to a loss of 4.6 billion yen, from a previously reported 15.8 billion yen profit. Chairman Mototsugu Ito stepped down to take responsibility. The company paid a 1.6 billion yen fine.
  3. 2006: Livedoor Co., a fast-growing Internet company, used stock splits, swaps and share purchases to fraudulently boost its share price. Founder Takafumi Horie was convicted and served a two and half year prison term.

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