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Toshiba cooked books to tune of ¥160 billion after nuclear disaster decimated profit targets: panel

JIJI

The total amount of operating profits Toshiba Corp. booked through inappropriate accounting in the five years through March 2014 is believed to have reached around ¥160 billion, sources have said.

The third-party panel investigating the electronic giant’s accounting scandal discovered that the padded amount is more than three times the ¥50 billion initially uncovered via Toshiba’s internal probe, but less than the rumored ¥200 billion.

The panel has confirmed that Toshiba President Hisao Tanaka and his direct predecessor, Norio Sasaki, now Toshiba vice chairman, effectively allowed losses to be carried over, as the company set ambitious profit targets for its mainstay businesses, including the infrastructure construction, semiconductor and personal computer divisions, the sources said Saturday.

The panel believes Toshiba cooked its books partly because of clouded prospects for its nuclear power business after the March 2011 disasters sparked a triple meltdown crisis at Tokyo Electric Power Co.’s Fukushima No. 1 atomic plant.

The nuclear crisis eventually forced all of the nation’s 48 commercial reactors offline.

Toshiba had hoped to foster the nuclear power business into a key profit driver.

In addition, Toshiba has also found it difficult to achieve its profit goals due to surges in labor and material costs following the 2011 earthquake and tsunami.

The panel, led by lawyer Koichi Ueda, a former chief prosecutor at the Tokyo High Public Prosecutors Office, will report its findings to Toshiba on Monday.

In its report, the panel is expected to propose that Toshiba appoint lawyers and certified public accountants as outside board members in order to prevent similar accounting irregularities from happening again.

The firm is scheduled to announce the outline of the panel report Monday evening. Tanaka is expected to hold a news conference Tuesday afternoon to explain the wrongdoing and announce his resignation.

In addition to the ¥160 billion in padded profits, Toshiba is likely to be forced to book impairment losses of tens of billions of yen in its semiconductor and other businesses, sources said. Overall, Toshiba’s operating profits are expected to be revised down by some ¥200 billion, the sources added.

  • DrHanibalLecter

    Toshiba is to be congratulated for its effort to put japanese tradition and culture first, even in front of profit.
    Reality and facts are not the important part, keeping up the appearances and making everything look good, that is important, that is the core.

  • GBR48

    There seems to be a widely held acceptance within the corporate sector that ‘market expectations’, based on rumour and whim, are some sort of fixed benchmark. The actual results of a company are then measured against these. In fact the results are (or should be) accepted and considered on their own merits. If they differ from ‘market expectations’, then the people concocting those ‘expectations’ don’t deserve the giant bonuses that they receive, as they clearly don’t know what they are talking about.

    Excessive targets, used as a tool to bully employees and attempt impossible levels of productivity, are generally counter-productive, albeit not always as spectacularly so as in this case. Usually they just destroy staff morale.

    Just two of the pathetic failures of corporate logic that lead to this sort of criminal corruption. As it is Japan, it is unlikely that anyone will actually go to prison for it, but what a waste. Fiddling the books and dragging the name of one of Japan’s biggest corporations into the dirt for no good reason.

    • Steve Jackman

      Companies around the world have the pressure of meeting earnings expectations from investors, however, this does not mean that they all engage in illegal and corrupt practices. I think this is a bigger problem in corporate Japan, because Japanese companies are so insular and opaque, and because Japanese culture places such a high emphasis on deference and company loyalty.

      Companies in the West tend to be much more diverse, which safeguards against such illegal practices to a much larger degree. In my experience working in management at large Japanese companies here in Tokyo, it is Japanese insularity which breeds a culture of deception and falsification at these companies. I am very weary of any data coming out of corporate Japan for this reason.

      To illustrate my point, here’s a partial list of major Japanese companies which have illegally manipulated financial and other data:

      – Yamaichi Securities files for bankruptcy in 1997 after accounting irregularities discovered.

      – Long Term Credit Bank of Japan is nationalized in 1998 after it is found that the bank had falsified financial statements.

      – It is discovered in 2002 that TEPCO had filed atleast 29 falsified reports with nuclear safety regulators since the 1980s.

      – Seibu Railways is delisted from the Tokyo Stock Exchange in 2004 after discovery of financial irregularities.

      – Cosmetics company Kanebo ceased operating as an independent company after it was discovered in 2005 that it had falsified its financial reports.

      – Nikko Cordial Corp is fined by Japanese regulators in 2006 for financial irregularities.

      – Huge accounting irregularities going back years is found at Olympus by new British CEO Michael Woodford in 2011.

      – Financial irregularities tied to gambling discovered at Daio Paper in 2011.

      – Takata corporation is hit by a huge scandal in 2014, when it is discovered that the company had been hiding information about its defective airbags for millions of cars.

      – Riken admitted in 2014 to one of the world’s worst scientific frauds, when it was disclosed that it had falsified research results on STAP cells.

      – Top Japanese executives at the Japanese unit of Novartis quit in 2014 after they admitted to falsifying data on the company’ drugs.

      – Senior management resigned from Toyo Tire and Rubber in 2015 after it is disclosed that the company had been falsifying data on its products.

      – Extremely serious accounting irregularities found at Toshiba recently in 2015, prompting the President of the company to resign.

      • GBR48

        Interesting. Thanks for taking the time to type all that out. Ethics are not always high up the list in corporate circles, but Japan Inc. does seem to have a cultural problem with bad financial news and a disturbing willingness to cook the books as an alternative.

  • Liars N. Fools

    Sometimes it is better to let the nuclear market go, especially since Fukushima has raised so many doubts about the safety culture of the industry.

  • Starviking

    We really need some figures because this:

    The panel has confirmed that Toshiba President Hisao Tanaka and his direct predecessor, Norio Sasaki, now Toshiba vice chairman, effectively allowed losses to be carried over, as the company set ambitious profit targets for its mainstay businesses, including the infrastructure construction, semiconductor and personal computer divisions, the sources said Saturday.

    …seems to be the actual wrongdoing.

    And this:

    The panel believes Toshiba cooked its books partly because of clouded prospects for its nuclear power business after the March 2011 disasters sparked a triple meltdown crisis at Tokyo Electric Power Co.’s Fukushima No. 1 atomic plant.

    Is just a bet that did not come through for Toshiba.

    I guess anything’s ok if it allows anti-nuclear headlines to dominate the pages.