Risk & Compliance

Toshiba Shareholders Sue Over Accounting

The lawsuit is the latest fallout from a financial scandal that has caused Toshiba's stock price to fall 40% since May.
Katie Kuehner-HebertDecember 7, 2015

Toshiba shareholders have sued five former executives over illicit accounting practices that caused one of Japan’s biggest corporate scandals.

In a lawsuit filed in Tokyo, 50 shareholders are seeking roughly 300 million yen ($2.43 million) in damages against three former presidents and two CFOs, according to Equities.com. The plaintiffs contend they would not have bought the company’s shares if they had known about the fraudulent accounting spanning nearly seven years.

“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.

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Toshiba has revised downward its profits from April 2008 to December 2014, saying they were inflated by $1.2 billion. Since the accounting irregularities were disclosed in May, the company’s stock price has slumped 40%.

A second round of lawsuits is expected to be filed in March, according to lawyers for the plaintiffs, and the total number of plaintiffs is expected to rise to around 1,000.

Last month, Toshiba itself sued the same five former executives, seeking 300 million yen in damages. The five are former presidents Hisao Tanaka, Norio Sasaki and Atsutoshi Nishida and former CFOs Fumio Muraoka and Makoto Kubo.

Tanaka stepped down in July after apologizing to angry investors “from the bottom of my heart” and describing the scandal as “the biggest crisis facing our company” since it was founded 140 years ago.

An internal probe found construction costs on certain infrastructure-related projects had been underestimated and that losses from the construction work were “not recorded in a timely manner.”

Japanese regulators on Monday recommended imposing a record fine of 7.37 billion yen ($60 million) on Toshiba, the largest ever in Japan for accounting-related violations. Toshiba previously said it had set aside 8.4 billion yen to pay for potential penalties.

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