Toshiba Risks Penalty for Raising $8 Billion on False Profit
by Takahiko Hyuga
July 22, 2015 — 11:24 AM SGTUpdated on July 22, 2015 — 3:23 PM SGT
Toshiba Corp. issued almost 1 trillion yen ($8 billion) of stocks and bonds when it was inflating earnings statements, leaving the company exposed to possible regulatory fines and investor lawsuits. The Japanese manufacturer sold 333 billion yen of shares in a public offering in May 2009, and issued 640 billion yen of bonds from May 2009 to December 2013, data compiled by Bloomberg show. Toshiba President Hisao Tanaka resigned on Tuesday, telling reporters that the company will take seriously a third-party panel’s findings that executives were involved in systematic overstating of profit.
“Raising money based on false information is fraudulent,” said Etsuro Kuronuma, a professor at Waseda Law School. “Toshiba violated the interests protected by the Financial Instruments and Exchange Act.” Continue reading
Audit system failed to detect misconduct at Toshiba
A third-party panel, which investigated the accounting irregularities at Toshiba Corp., said in its report Monday that three successive presidents, including President Hisao Tanaka and his predecessor Norio Sasaki, who is now vice chairman, are responsible for the scandal.
Two major factors – the malfunction of the auditing system and the failure to prevent abuses of the top management that was desperate to improve performances – have led to the overstating its operating profits. Observers believe that the problem is deeply rooted in conflicts among the three presidents.
The panel’s report stipulated that the main cause for the improper accounting was a pattern where the top management presented a numerical goal for earnings improvement, dubbed a “challenge,” to each division chief and strongly urged them to achieve the targets. Continue reading