Tokyo-based electronics maker Toshiba confirmed that it is under investigation by the U.S. Department of Justice and the Securities and Exchange Commission over alleged accounting irregularities.
In a statement, Toshiba said that certain of its U.S. subsidiaries received information requests from the Justice Department and the SEC for accounting irregularities and are cooperating with the investigation. Toshiba said it will make timely announcements on matters related to the probe that require disclosure.
Toshiba’s disclosure about the U.S. investigation follows media reports by Bloomberg that U.S. regulators are investigating allegations that Toshiba’s U.S.-based nuclear business division, Westinghouse, hid $1.3 billion in losses.
The U.S. investigations follows news that Japan’s Securities and Exchange Surveillance Commission fined the company$62.1 million—the largest penalty ever imposed Japan’s securities watchdog—for falsifying financial statements and documents involving its issuance of corporate bonds, Bloomberg reported. Additionally, its former auditor, Ernst & Young ShinNihon, was fined $17.4 million and barred from accepting new business for three months.
As Compliance Week previously reported, a separate investigation earlier this year found that Toshiba had overstated its earnings by $1.3 billion over the last seven years. An independent panel concluded that several top executives at the company not only tolerated but encouraged a profit-over-principle culture.
According to the investigation report, “a corporate culture existed at Toshiba whereby employees could not act contrary to the intent of their superiors.” This culture ultimately led to “inappropriate accounting treatments to achieve the targets in line with the will of their superiors.” The intentional overstatements of revenue and delay in booking losses ultimately led to demands for larger misstatements in succeeding periods.
The fallout from that scandal resulted in the resignation in of Toshiba’s then-CEO Hisao Tanaka and seven other executives, leading to a complete restructuring of its management team.
In response to the findings of the report, Toshiba said put a new management team in place. “We are responding resolutely to the discovery of inappropriate accounting by enhancing internal controls,” CEO Masashi Muromachi said in a statement.
In October 2015, Toshiba initiated wide-ranging corporate governance reforms, including establishing an internal audit division, and an audit committee composed entirely of outside directors. “At the board level, we have reinforced oversight of top management and operations by appointing a majority of outside directors,” Muromachi said.