Business / Corporate

Toshiba shareholders sue former executives over cooked books as firm fined record ¥7.37 billion

Kyodo, Bloomberg

A group of Toshiba Corp. shareholders sued the embattled company and its former executives Monday, seeking about ¥300 million in damages for the losses incurred after the firm’s stock price plunged over illicit accounting practices.

In the first group lawsuit filed against Toshiba, 50 shareholders from 15 prefectures filed for damages with the Tokyo District Court against three former presidents and two chief financial officers.

The plaintiffs, whose claims range from ¥170,000 to more than ¥10 million, say they would not have bought the shares had they known about the fraudulent accounting spanning nearly seven years, according to their complaint.

“If the damage to shareholders is not repaired in a case like this, confidence in the Japanese securities market will be lost,” lead lawyer Takahisa Sano said at a news conference.

Toshiba declined to comment, saying it has not received the complaint.

Meanwhile, the Securities and Exchange Surveillance Commission on Monday recommended to the Financial Services Agency imposing a fine of ¥7.37 billion on Toshiba for falsifying earnings — the largest financial penalty ever sought by the watchdog and eclipsing the ¥1.6 billion imposed on IHI Corp. in July 2008 for issuing falsified financial statements.

In response to the move, Toshiba President Masashi Muromachi offered a fresh apology Monday over the scandal.

“We take it seriously that a record fine has been recommended,” Muromachi said, adding Toshiba intends to pay the amount after receiving an order from the FSA.

He vowed to improve governance, strengthen internal controls and change Toshiba’s corporate culture, while considering the revamping of some of its operations including personal computers and white goods.

Toshiba also said it will increase the amount of damages it is seeking in a suit it filed in November against the five former executives from ¥300 million once Toshiba pays the fine.

The commission is still considering whether to recommend penalties against former top executives at the firm, an SESC official said. Takuji Yano, a spokesman for the FSA, which oversees the commission, declined to comment.

The Tokyo-based electronics and industrial giant, which has lost about 40 percent of its value since disclosing an internal probe on April 3, has set aside ¥8.4 billion to cover possible fines in the case.

Toshiba has revised downward its profits from April 2008 to December 2014 after admitting they were inflated by a total ¥224.8 billion on a pretax basis. The company’s stock price dropped ¥180 per share by late last month from May levels before the scandal was revealed, the complaint said.

Other shareholders are planning similar moves with courts in the cities of Osaka and Fukuoka before the year’s end, while a second round of such lawsuits is expected to be filed in March, according to lawyers for the plaintiffs.

The total number of plaintiffs could rise to around 1,000.

Toshiba already filed a ¥300 million damages suit against the same five former management officers — former Presidents Hisao Tanaka, Norio Sasaki and Atsutoshi Nishida and former Chief Financial Officers Fumio Muraoka and Makoto Kubo — on Nov. 7.

The three former presidents resigned in July and the company has slashed executive pay, trimmed its workforce and revamped its board.

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