• Kyodo

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The Securities and Exchange Surveillance Commission has queried three former Toshiba Corp. presidents over falsified earnings reports, market sources said Wednesday.

The financial watchdog questioned Atsutoshi Nishida, Norio Sasaki and Hisao Tanaka on a voluntary basis, the sources said.

The SESC is apparently weighing the possibility of seeking criminal prosecution on suspicion of falsifying financial reports in violation of the Financial Instruments and Exchange Act.

Nishida has denied being aware of any wrongdoing and has said that improper practices took place only in Toshiba’s personal computer business, and that people in charge of the unit should be held responsible.

A third-party panel looking into Toshiba’s accounting irregularities said last year that the company’s top management had pressured its senior officials to meet ambitious profit targets, prompting the overstating of profits over seven years in a “systematic” manner.

The panel concluded that Nishida, Sasaki and Tanaka had been aware of padded profits in Toshiba’s loss-making personal computer business.

The sources said Toshiba’s PC business is suspected of having inflated profits by taking advantage of “buy-sell transactions” in which the company sells parts to original development manufacturers at higher prices than purchased and buys PCs assembled by them later.

Improper accounting practices were found in the recording of transactions by its infrastructure, television and semiconductor units in addition to the personal computer business.

Last December, the Financial Services Agency imposed a record ¥7.37 billion ($71 million) fine on Toshiba for falsifying financial reports, following a recommendation by the SESC. The scandal-hit company paid the fine in January.

Toshiba is seeking up to a total of ¥3.2 billion in a damages suit filed against five former executives, including the three former presidents.

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