One of the biggest corporate scandal this year was certainly the one connected with Toshiba, and not so long ago, in 2011, the Olympus Corporation scandal has also shaken the country as one of 8 worst corporate scandals in Japan.
Japan’s Prime Minister Shinzo Abe stated that the government was taking efforts to improve the corporate governance two months before the scandal, after Toshiba’s CEO apologized to him for the accounting scandal in one of the most famous country’s company. The government was worried that this scandal will scare away the investors and lose the market’s trust, while they were earlier trying to strengthen the investors’confidence in Japan. Toshiba corporate scandal was compared to the Enron fiasco, one of 10 biggest corporate scandals in modern history.
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Some of our sources for 8 worst corporate scandals in Japan were The Japan Times, The Ethical Corp, CNBC, Bloomberg – The story behind the Olympus scandal, Reuters and many more. We put together everything we read about the biggest corporate scandals in Japan, ranked them according to the lost money and this is what we got:
8. Livedoor Corporation
$2 million
This Japanese company was an Internet service provider until it was knocked down in one of the worst corporate scandals in Japan. Tokyo prosecutors conducted a raid on the company’s locations and the homes of Livedoor’s executives, because of suspicions of security fraud. Takafumi Horie and four subsidiary executives were arrested for accounting and security fraud. Horie was convicted for two and a half years in prison because of his disrepute. During the next four months (2006), the company lost 90% of its stock price.
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7. IHI Corporation
$13 million
This Japanese company is one of the biggest makers of heavy machinery in Japan and produces industrial machines, aircraft engines, ships, etc. Mototsugu Ito, the company’s chairman, took the responsibility for the charges for editing earnings for 2007 to a loss of $13 million. IHI Corporation had to pay one of the largest accounting penalties in Japan.
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6. Nikko Cordial Corporation
$100 million
An accounting fraud in this company was discovered in 2007. Nikko Cordial Corporation was a subsidiary of Nikko Cordial Securities and the third largest brokerage in Japan. It was reported in the Japan Times that the top management of the company was involved in padding profits. The chief financial officer of the company, Hajime Yamamoto, was blamed for being involved in a fraud (used to inflate profits), during the five-year-period time (2001 to 2006).
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5. Toshiba Corporation
$1.2 billion
Toshiba announced having financial problems in April this year and immediately changed up the management of the company. After this announcement, Toshiba faced the falling of shares and caused the trouble to many shareholders and clients. The chief executive Hisao Tanaka resigned in July after it is found that the company overstated its profits by $1.2 billion over the past several years. It was an embarrassing scandal for Toshiba, one of the most well-respected companies in Japan and a worldwide respected brand.
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4. Kanebo Ltd.
$1.6 billion
Kanebo Cosmetics was founded in 1887. The Japan Times reported that four certified public accountants were arrested for this scandal. Kuniaki Sato, Seiichiro Tokumi, Kazutoshi Kanda and Kazuya Miyamura were suspected of producing false financial statements. They denied these allegations and said that it was not done intentionally. Former president and the vice president of the company both received suspended jail sentence.
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3. Olympus Corporation
$1.7 billion
Olympus scandal is one of the worst corporate scandals in Japan. Michael Woodford, the president of the company in 2011, exposed loss-hiding arrangements. He became famous for blowing the whistle on the fraud in Olympus Corporation, his own company. He hired Price Water House Coopers to run an independent inspection of the accounts and was under the protection of the Metropolitan police. Olympus Corporation was fined $5.6 billion and announced that the company lost nearly $10 million because of the accounting scandal.
2. Yamaichi Securities Co.
$2.5 billion
Yamaichi Securities Co. reported $2.5 billion deficit in 1997.T he company was declared bankrupt in 1999. The executives set up Yamaichi Enterprise as a separate company. It is estimated that $2.5 billion was hidden in Yamaichi’s subsidiary, and the fraud was discovered by Weekly Toyo Keizai in 1997. Shohei Nozawa, the last president of the company, apologized on Japanese television. The former president and the chairman of the company were sentenced to two years in prison.
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1. The Long-Term Credit Bank of Japan
$4 billion
LTCB was founded in 1952. It was one of the largest financiers of Japan’s postwar development. The bank faced problems with bad debts ($4 billion) during the nineties and hence it was nationalized in 1998. The president of the Long-Term Credit Bank was arrested and convinced to three years in prison and four years of probation, but the Supreme Court of Japan confirmed that Katsunobu Onogi used an old rules of accounting and the convictions for him and other two executives were overturned. This was the biggest scandal of all 8 worst corporate scandals in Japan.
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