Update: Japan regulator recommends record US$60m Toshiba fine

[TOKYO] Japan's Securities and Exchange Surveillance Commission recommended fining Toshiba about 7.37 billion yen (S$83.9 million) for falsifying earnings, the largest financial penalty ever sought by the watchdog.

Toshiba misled investors by filing false financial statements for several periods including 2012 and 2013, according to a statement from the regulator Monday. Toshiba said it will hold a press conference to discuss the recommended fine at 5:45 pM Monday in Tokyo. The commission is still considering whether to recommend penalties against former top executives at Toshiba, people familiar with the matter have said.

Toshiba has replaced its top management and is raising cash by selling shareholdings and operations in the wake of Japan's biggest accounting scandal since camera maker Olympus's US$1.7 billion in irregularities in 2011. The Tokyo-based electronics and industrial group, which has lost about 40 per cent of its value since disclosing an internal probe on April 3, has set aside 8.4 billion yen to cover possible fines in the case.

This case is "extremely regrettable," top government spokesman Yoshihide Suga said in Tokyo after the commission's statement. "It's important that Toshiba rebuilds its corporate structure and makes proper efforts to prevent a recurrence."

The conglomerate, which makes everything from nuclear power plants to chips, washing machines, televisions and laptop computers, also faces lawsuits from shareholders.

Regulators have yet to announce results of probes seeking evidence for possible criminal prosecutions of former executives, including the three ex-presidents that quit the company after investigations concluded they caused subordinates to falsify results.

Former presidents Hisao Tanaka, Norio Sasaki and Atsutoshi Nishida resigned in July and the company has cut executive pay, trimmed its workforce and revamped its board amid a scandal that widened repeatedly as more irregularities were uncovered. The company has said it is suing the three former CEOs and two former chief financial officers, seeking 300 million yen of damages. Toshiba said Oct 1 it had identified 30 more executives involved in the accounting scandal and would punish them, while allowing them to keep their jobs.

"Changing CEOs doesn't mean Toshiba has improved," said Mitsushige Akino, executive officer at Ichiyoshi Asset Management in Tokyo, which doesn't hold the company's shares. "It could take five to 10 years to regain trust from investors."

Toshiba has been selling assets to raise cash. It announced the sale of its image-sensor chip operations to Sony last week and has sold its stakes in Finnish escalator maker Kone Oyj and Japanese medical equipment manufacturer Topcon Corp.

Toshiba, Fujitsu and Sony spinoff Vaio are considering combining their personal computer operations, according to a person familiar with the matter who asked not be identified because the matter is private. Toshiba got about 7 per cent of its revenue, or about 128 billion yen, from PCs in the September quarter, according to data compiled by Bloomberg.

Worldwide PC industry shipments are on course to shrink 4.9 per cent to below 300 million units this year after peaking at 364 million in 2011, according to IDC Corp. Vaio, which was spun off from Sony in July 2014, would likely be the surviving company, with the other two making investments and transferring their operations to the combined entity, the Nikkei reported on Friday.

In September, President Masashi Muromachi won shareholder approval to lead the company at an extraordinary meeting that included calls for his resignation. Investors angered by damage done to the company interrupted proceedings several times, shouting over the president.

Muromachi in September pledged to prune underperforming businesses, including workforce reductions in appliances, personal computers, televisions and semiconductors. Toshiba had about 198,700 employees as of March 31, the lowest since at least 2009, according to data compiled by Bloomberg.

Toshiba net income probably fell in the current quarter by about 96 percent to 2.3 billion yen, the average of five analyst estimates compiled by Bloomberg. Sales probably fell 12 per cent in the three months ending Dec 31, the fourth quarterly drop.

BLOOMBERG