Toshiba Said to Face U.S. Probe Over Westinghouse Accounting, 17 Mar Tom Schoenberg and Matt Robinson, 2016, Bloomberg Toshiba Corp. is under investigation by the U.S. government over allegations that it hid $1.3 billion in losses at its nuclear power operations, according to two people familiar with the matter. Shares plunged in Tokyo.
The Justice Department and the Securities and Exchange Commission are looking into whether fraud was committed, said the two, who asked not to be named because the investigations aren’t public. The probes, they said, follow one by Japan’s securities regulator, which found that Toshiba falsified financial statements and documents involving its issuance of corporate bonds.
U.S. authorities are scrutinizing allegations made in an internal review published last year by the Tokyo-based company, the two people said. The report, a 334-page version of which was published in English on Toshiba’s website in December, said management was complicit in padding profits for almost seven years. It led to the resignations of top officials, including Hisao Tanaka, Toshiba’ president and chief executive officer.
Until now, the investigation into Toshiba’s accounting practices had been limited to its home country, where regulators fined the company $62.1 million — the largest penalty ever imposed — and fined its former auditor, Ernst & Young ShinNihon, $17.4 million and barred it from accepting new business for three months. Toshiba President Masashi Muromachi, who took over as the scandal unfolded last year, promised to take steps to overhaul operations and prevent future wrongdoing.
The stock fell 8 percent to 192 yen in Tokyo, the biggest drop since Feb. 5. The shares had climbed as as much as 4.9 percent before the probe was reported.
“The markets are very sensitive to any news of impropriety,” said Yukihiko Shimada, a Tokyo-based analyst at SMBC Nikko Securities Inc. “Toshiba has previously assured investors that everything was right at Westinghouse. Their track record isn’t great.”
The recent expansion by U.S. authorities, which are known to open cases even when another jurisdiction is already investigating, means Toshiba could face further enforcement action in America. The U.S. can exert jurisdiction in part because the allegations involve its Westinghouse Electric Co. unit, which is based in Cranberry Township, Pennsylvania. The report also names Ernst & Young, which audited the Westinghouse accounts……..
In Japan, Toshiba’s accounting scandal is the largest since 2011, when Olympus Corp. admitted to using takeovers to hide $1.7 billion in losses. Toshiba, a 140-year-old industrial group that makes everything from nuclear reactors to microchips and home appliances, dropped to a 35-year low in Tokyo in February after widening its annual loss forecast to a record $6 billion as it restructures in the wake of the scandal.
Toshiba said it initially uncovered irregularities related to “percentage of completion” estimates used on infrastructure projects including nuclear, hydroelectric, wind-power equipment, air-traffic control and railway systems. Percentage of completion accounting is a subjective method that relies almost completely on management estimates on the profitability of long-term contracts………
Westinghouse was purchased by Toshiba for $5.4 billion in 2006. Toshiba explained to investors in November that Westinghouse’s nuclear plant construction business was harmed by the Fukushima nuclear disaster.
Toshiba’s internal report describes how the company failed to account for more than $100 million in Westinghouse losses on its 2013 books involving the construction of a nuclear power plant in Florida. Toshiba officials traveled to the U.S. to meet with Westinghouse executives to discuss findings showing increasing costs of the Florida project…….http://www.chicagotribune.com/news/sns-wp-blm-toshiba-0c20a5c8-ec23-11e5-a9ce-681055c7a05f-20160317-story.html
