Toshiba inflated profits by $1.2 billion with top execs' knowledge: investigation

Mon Jul 20, 2015 11:22am EDT
 
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By Ritsuko Ando

TOKYO (Reuters) - Japan's Toshiba Corp overstated its operating profit by 151.8 billion yen ($1.22 billion) over several years in accounting irregularities involving top management, an independent investigation said in a report on Monday.

In the country's biggest corporate scandal in years, the findings could lead to the restatement of earnings, a board overhaul and potentially hefty fines at the computers-to-nuclear conglomerate.

Toshiba President and Chief Executive Hisao Tanaka and his predecessor, Vice Chairman Norio Sasaki, were aware of the overstatement of profits and delay in reporting losses in a corporate culture that "avoided going against superiors' wishes," the investigating committee said in a report filed by Toshiba to the Tokyo Stock Exchange.

The overstatement was roughly triple Toshiba's initial estimate. Sources have said Tanaka and Sasaki would resign in the coming months and most of the board would be replaced to take responsibility for the shortcomings.

The report said Tanaka and Sasaki had set operating profit targets that the heads of divisions were required to meet, applying pressure by hinting at withdrawing from areas that underperformed.

"Within Toshiba, there was a corporate culture in which one could not go against the wishes of superiors," the report said.

"Therefore, when top management presented 'challenges', division presidents, line managers and employees below them continually carried out inappropriate accounting practices to meet targets in line with the wishes of their superiors."

Sources said previously that one of the investigators' theories was that top executives, worried about the impact of the 2011 Fukushima disaster on nuclear business, set unrealistic targets for new operations such as smart meters and electronic toll booths.   Continued...

 
The logo of Toshiba Corp is seen as people are reflected on a window at the company's Hydrogen Energy R&D Center after its opening ceremony in Tokyo April 6, 2015. REUTERS/Toru Hanai