Toshiba President, Top Execs Resign In $1.2 Billion Accounting Scandal
A widening $1.2 billion accounting scandal has forced Toshiba president Hisao Tanaka and two top executives out the door after an investigation discovered officials systematically and artificially bloated the company’s earnings in the past six years.
Norio Sasaki, Toshiba vice chairman, and Atsutoshi Nishida, an adviser–both of whom preceded Tanaka as company president–also exited in a top management purge following disclosures that key executives set unachievable profit goals that prompted the fuzzy math, or more politely, led to the accounting improprieties.
In particular, Tanaka and Sasaki were charged with delaying booking losses and orchestrated an effort to compel management to follow suit, a Bloomberg report said.
Toshiba officially copped to an earnings misstatement spanning six years of exaggerated profits and write-downs, amounting to 152 billion yen, or $1.2 billion. Some prior estimates had suggested the accounting blunders might approach $3 billion.
“For the company to rebuild there needs to be a renewal of the management structure,” Tanaka said, Bloomberg reported. Tanaka, chairman Masashi Muromachi and vice president Keizo Maeda all bowed in apology, the report said.
Toshiba said it will name new top management next month. In the scandal’s immediate aftermath, Muromachi will take over as interim president.
So far, Japanese authorities have not charged the Toshiba executives or the company with breaking the law.
Some 25 percent of Toshiba’s 16-member board is comprised of independent directors, which has prompted some observers to question their ability to assess the company’s strategy or to closely watch its accounting procedures.
Others have speculated that Toshiba overstated costs and revenue associated with new businesses such as smart meters and electronic toll booths in the wake of the country’s 2011 Fukushima nuclear disaster as the vendor sought to recoup lost sales.
At this point, it’s still not clear to what degree some of Toshiba’s top management were aware of the improper accounting and looked the other way. But, Koichi Ueda, who led the investigation, said he was “shocked by the fact that one of the leading companies organizationally conducted such a thing,” according to the Bloomberg report.
The investigation concluded that the fudged accounting was “skillfully” shielded from outsiders, the report said.
Owing to the investigation, Toshiba said it elected to suspend paying its year-end dividend.