Toshiba sues former executives for their role in accounting irregularities

We have previously reported on the Toshiba Corporation (Toshiba) accounting irregularities here and here.  In last month's update, we reported that the company was considering suing a number of its former executives for a reported JPY 1 billion (US$ 8.26 million), a proposal initiated by one of its shareholders.

On 7 November 2015, Toshiba confirmed that it has sued three former presidents and two former chief financial officers for JPY 300 million (US$ 2.4 million) in total, including previous CEO Hisao Tanaka.  The basis of this action in the Tokyo District Court is a report submitted by an independent panel consisting of three external lawyers, who investigated the liability of 98 former and current executives.  The executives continue to deny any direct involvement in the accounting irregularities that occurred during their tenure.  The relatively low value of the suit initiated by Toshiba has been deemed overly lenient by some commentators, given that the total losses to the company were in excess of JPY 1 billion.

The Securities and Exchange Surveillance Commission (SESC) is currently considering recommending a record penalty of JPY 7 billion for Toshiba to the Financial Services Agency.  In a separate action, 70 shareholders are expected to file suits against Toshiba in the first half of December for the steep fall in stock prices following the company's admission of accounting impropriety. Lawyers for the shareholders expect the total number of plaintiffs to exceed one thousand.

SESC investigates activist investor and convicted insider trader for manipulation of stock prices

The Japanese Securities and Exchange Surveillance Commission (SESC) is investigating Yoshiaki Murakami, a well-known shareholder activist, for alleged manipulation of stock prices.  The SESC raided the homes of Murakami and his daughter on 25 November.  Some of the alleged manipulation was through short-selling shares of clothing company TSI Holdings Co. and then buying them back.  In 2007, Murakami was convicted on insider trading charges, and received a two-year prison sentence (which was ultimately suspended).

Commentators do not expect the investigation to substantially affect other equities or detract from Japan's wider efforts to overhaul its corporate governance culture and encourage foreign investment.