Toshiba (TYO:6502) said yesterday that it agreed to pay a $60 million fine assessed by Japanese regulators after a $1.3 billion accounting scandal broke earlier this year.
Ex-CEO Hisao Tanaka and 7 other senior Toshiba executives resigned July 21 after admitting that they cooked the books to show inflated profits. Toshiba later confirmed that it overstated profits going back to fiscal 2008/09 by some $1.29 billion (¥155 billion), reporting a -$314.6 million net loss (-¥37.8 billion) for the last financial year through March.
Japan’s securities watchdog recommended Dec. 7 that Toshiba be fined a record ¥7.37 billion (about $60 million), the same day a group of 50 investors leveled a lawsuit seeking ¥302 million ($2.5 million) in damages against the company.
“This is a grave incident, whose impact is large,” Kiyotaka Sasaki, secretary general at the Securities and Exchange Surveillance Commission said at a briefing. The watchdog had taken a new approach in its investigation, given Toshiba’s position as a global company and its importance in Japanese business, by going beyond fact-finding to determine what drove the company to illegal acts, Sasaki said.
Yesterday Toshiba said it admitted the “relevant facts” and would pony up the full amount of the fine.
“The company takes seriously the fact that the recommendation for issuance of an administrative monetary penalty payment order has been made with the highest penalty amount ever imposed, and again feels deep remorse and expresses its sincere apologies to shareholders, investors and all other stakeholders for any inconvenience and concern it may have caused them,” Toshiba said.
Toshiba was one of the 1st Japanese companies to adopt a U.S.-style board structure which, with more outside directors, is considered more transparent in terms of corporate governance. But Sasaki said Toshiba’s board failed to function as intended.
Toshiba has set aside around ¥8.4 billion ($68.5 million) to cover administrative penalties. The impact of the fine on its earnings is widely expected be minimal.
Sasaki declined to comment on whether the SESC would also file criminal charges against Toshiba’s former top officials. The company itself has sued 5 former executives, including 3 former chief executives, for mismanagement.
Earlier this week, Toshiba denied reports that it was looking to lay off as many as 7,000 workers and sell assets including Toshiba Medical Systems, but confirmed that it’s examining ways to restructure.
Material from Reuters was used in this report.
