Toshiba rattled by report of fresh scandal evidence
New headache for investors still grappling with writedown warning
Investors in Toshiba faced fresh worries after a report that Japan’s securities watchdog has turned up new evidence in its pursuit of criminal charges against former executives at the scandal-plagued conglomerate.
Shares in the company fell more than 5 per cent on Wednesday morning as the Tokyo stock market opened for its first day of trading this year, before recovering some poise. The stock was up 1 per cent at ¥285.8 in afternoon trading while the broader market was up 2.4 per cent.
The volatility came after the Asahi newspaper reported on Tuesday that the Securities and Exchange Surveillance Commission planned to present new findings to Japanese prosecutors, alleging that Toshiba’s former top management played a role in the padding of profits by ¥40bn ($339m) over a three-year period.
The SESC and Toshiba declined to comment on the report. Toshiba’s former top executives have denied any wrongdoing.
New findings by Japanese regulators would be the latest blow for the struggling nuclear-to-electronics group, after revelations last week that it is facing a multibillion-dollar writedown at its US nuclear division Westinghouse.
According to the Asahi report, the SESC alleged that Toshiba may have violated Japanese law by falsely reporting a rise in profits at its personal computer division during the 2012-2014 fiscal years. Following its investigation, the SESC concluded that the padding of profits was done on the instruction of top management.
The allegation is part of the SESC’s long-running investigation into Toshiba’s accounting scandal where the company has admitted to inflating its net profits by $1.3bn over seven years.
Under its new chairman, Mitsuhiro Hasegawa, the SESC has recently expressed its intention to push ahead with the probe beyond a fine of ¥7.37bn, which Toshiba paid a year ago.
The SESC reportedly plans to present prosecutors with new evidence it has uncovered, including emails to former chief executives. Prosecutors have thus far opted not to pursue a criminal case due to a lack of evidence and differences in accounting rules during the years in question.
Former chief executives at Toshiba, including Hisao Tanaka, who stepped down in 2015, have denied giving instructions to their subordinates to cook the books.
Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said a potential criminal investigation into Toshiba’s former executives would be another headache for investors who are still weighing the fallout from the company’s recent writedown warning.
Toshiba’s shares plunged 37 per cent in the last week of December after the group announced it could book “several billion dollars” of impairment losses related to Westinghouse’s $229m acquisition last year of Chicago Bridge & Iron’s nuclear construction subsidiary, Stone & Webster.
Analysts say the latest impairment loss could be at least as large as the $2.3bn writedown Toshiba took on its nuclear business in April, and threatens the efforts by Satoshi Tsunaka, the new chief executive, to rebuild investor confidence following its accounting scandal.
“We don’t know yet how far the impairment losses will expand and the nuclear business is clearly no longer as profitable as in the past,” Mr Akino said. “The uncertainty still hanging is what kind of survival strategy Toshiba has.”