In previous updates, we have reported on Toshiba Corporation ("Toshiba")'s independent investigation into its accounting practices, including that the company had overstated its operating profit by JPY 151.8 billion (US$1.22 billion).

On 15 September 2015, the Tokyo Stock Exchange ("TSE") came down heavily on the company by announcing a record penalty of JPY 91.2 million (US$750,000) for the irregularities. The TSE also designated Toshiba's stock as "Securities on Alert" for a period of one year as a warning to potential investors, compelling Toshiba to file a report outlining the ways it intends to improve its internal controls. In a statement, the TSE said the accounting scandal “eroded the confidence of shareholders and investors” and exposed “serious problems with its internal control structure”. Failure to improve its wider corporate governance mechanisms could see Toshiba's shares de-listed. Toshiba also received a penalty of JPY 17.4 million (US$143,000) from the Nagoya Stock Exchange ("NSE"), and a similar "Securities on Alert" designation for its stock listed on the NSE.

Toshiba is the second major Japanese company to be subject to the "Securities on Alert" designation in recent years, the first being Olympus Corporation, following its high profile financial fraud. The system was introduced in 2007 with the aim of securing investor confidence, and allowing companies the chance to reform their internal mechanisms before facing de-listing.

The TSE's decision came as the company finally announced its accounts for 2014 on 7 September 2015, having missed two previous deadlines. Toshiba announced net losses of JPY 37.8 billion (US$318 million), after reducing its profit estimates following the discovery of the accounting irregularities. Toshiba is expected to face a much larger fine by Japan’s financial regulators, and is said to have set aside in excess of JPY 8 billion for potential fines.


Last month's update reported on the arrest of the former head of defunct bitcoin exchange Mt. Gox, Mark Karpelès, on suspicion of inflating his cash account through unauthorized access to the computer system of the exchange in February 2013, and his subsequent re-arrest three weeks later for embezzlement of JPY 321 million (US$2.6 million). On 11 September 2015, he was formally charged with embezzlement by Japanese prosecutors, in the aftermath of the disappearance of about 850,000 Bitcoins, worth around JPY 48 billion (US$390 million) from customers' accounts and the Mt. Gox reserves.

The charges came after months of investigations by the Japanese authorities. This case highlights the challenge presented by the regulation of digital money, an issue with which regulators in many jurisdictions are currently grappling.


A sectional head at the Land, Infrastructure, Transport and Tourism Ministry's Capital Area Airports Division was arrested on 24 September 2015 following allegations that he received bribes in return for giving favours to an aircraft maintenance company whose use of an airport hangar site at Tokyo's Haneda Airport was about to lapse on account of delayed payment of certain national asset usage fees. The hangar is owned and operated by the state.

Ryuya Kawamura is accused of accepting JPY 500,000 (US$4,158) in December 2013 from the former president of aircraft maintenance firm Wings of Life, in return for Wings of Life's extended use of the hangar facility despite delays in their fee payments. Some reports suggest Mr Kawamura accepted bribes running to several million yen, in addition to a family holiday paid for by the former president of the company.

It is alleged that Mr Kawamura took advantage of his position to pressurise other officials in the Ministry into providing a grace period for the company to pay the overdue fees, and that he advised the company on how to deal with other officials in the Transport Department.

The former President of Wings of Life, Minoro Ijuin (a South Korean national) was also arrested, on suspicion of supplying the bribes. Both parties have generally admitted to the allegations.