Toshiba faces $60m accounting scandal fine
Penalty comes as shareholders file lawsuit against company and ex-chiefs
07/12/2015: Toshiba could face a fine of $60 million (39 million) after committing accounting fraud that misrepresented its financial health by more than a billion dollars.
Over a period of seven years, the Japanese tech giant claimed its profits were $1.3 billion higher than they really were.
As a result, Japan's Securities and Exchange Surveillance Commission has recommended the $60 million penalty to the country's Financial Services Agency (FSA). It would be the largest accounting violations fine in Japan's history.
Toshiba has already set aside 8.4 billion Yen ($68 million) to pay such a fine, which would have to be approved by the FSA, but it comes as 50 shareholders filed a lawsuit today demanding $2.45 million damages from the company, three former CEOs and two former CFOs.
They are pursuing the claim because Toshiba's share value dropped dramatically after the scandal came out, declining 40 per cent since April.
It comes after the company revealed $318 million losses for the year to March 2015 after it was expected to post a 1.2 billion profit.
07/09/2015: Toshiba has posted losses of $318 million and drastically reduced its earnings for the past seven years after a scandal in which it was found to have overstated years of profit-making.
The announcement has been delayed repeatedly after numerous disclosures of far-reaching irregularities in its accounting, amounting to $1.3 billion of overstated profits over seven years.
The 140-year-old firm said its annual loss for the year to March 2015 stands at $318 million, a catastrophic outcome after experts had predicted a 1.2 billion annual profit.
Toshiba's president and vice-president left the company earlier in July after an independent panel found the company had overstated profits for the past six years, around triple an initial estimate from the company.
The firm was forced to issue an apology and said it will now move to avoid further irregularities in its accounting procedures.
Toshiba said that while the US economy had lost some momentum in the second half of 2014, the UK had witnessed a strong performance and the Eurozone had sustained a gradual recovery.
It added that despite China's slowdown, solid growth was seen in South East Asia and India.
The firm has now set up a "management revitalisation" committee to undertake negotiations on a new management team. Former Shiseido president Shinzo Maeda will be the head of a revamped 11-member board, the majority of which are external directors, the company announced.
"Toshiba will not announce an FY2015 forecast at this point, as the company continues to carefully evaluate the operational impacts of inappropriate accounting," the firm added.
It said its plans now will include speeding up business selection and concentration, reformulating its business and financial structure with appropriate measures.
Toshiba could now face a fine from regulators over the financial scandal, which is the biggest in Japan since 2011 when Olympus was discovered to be involved in a $1.7 billion scheme to conceal over 20 years of investment losses.
This article was originally published on 7 September 2015 but was subsequently updated to reflect the latest developments (most recently on 7 December 2015).
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