Ailing Japanese corporation Toshiba is the target of a lawsuit from embittered shareholders over the stock price crash that resulted from a multi-billion dollar accounting debacle.
Some fifty individuals have sued the organisation as well as with three former CEOs and two ex-CFOs for 301.99 million yen (£1.62m) in damages, according to documents filed at the Tokyo District Court.
The legal spat follows an accounting probe in April that led Tosiha to admit it had inflated profits by $1.2bn since the start of the global financial crisis, thanks to overly ambitious profit targets and a culture that prevented staff from questioning executives’ poor decisions.
In the intervening months Toshiba's stock price has slumped 40 per cent compared to the original value before the troubles emerged – a point investors aren’t willing to accept without compensation.
“Toshiba falsified its financial statements and misled stockholders,” the lawsuit alleges, according to Reuters. “Toshiba’s fraud has done immeasurable damage to the trust in a stock company system.”
This is the first of many lawsuits to hit the corporation, one lawyer said at a news briefing, who claimed as many as 1,000 Toshiba investors across Japan could launch cases.
In another related move, Japanese stock market watchdog, the Securities and Exchange Surveillance Commission, today recommended to the Financial Services Agency that Toshiba be fined almost $60m for the accounting calamity.
Irrespective of the scandal, Toshiba’s PC and TV businesses have fared badly in 2015, with current chief exec Masashi Muormachi mulling cuts to the workforce to counter falling sales and deepening losses. He admitted in October the businesses had “lost earning power” and this meant it needed to “urgently take action”.
Toshiba used to be the world's number one notebook maker – but that was 15 to 20 years ago, and since it has fallen down the ranks. Some might say it languishes on the sidelines.
At the end of last week, reports surfaced that Toshiba, along with Fujitsu and the private equity people behind Sony’s former VAIO brand, were thinking of making a go of it together in Japan.
The backers of VAIO took the business private last year and retrenched to Japan as it stemmed the unit’s losses, and has already started to spread its tentacles into the US.
As for Toshiba, the PC division has already gone through a series of cost cutting exercises, with most of the original senior management team in Europe exiting the business. Clearly the business needs to find some way forward.
Over at Fujitsu, the PC and mobile business units are being spun out of the over-arching product division. The company said this is to give them more autonomy – and insists it is not selling them off. ®