Accounting scandal may cost Toshiba 1.2bn in writedowns

(MENAFN- Arab News) TOKYO: Toshiba Corp. appointed Masashi Muromachi as president to lead the maker of memory chips and nuclear power plants as it emerges from an accounting scandal that may cost at least $1.2 billion in writedowns.
Muromachi 65 had been named interim president in July and will now cede his post as chairman to Hiroyuki Itami an outside board member Tokyo-based Toshiba said Tuesday. The company said it expects to report a net loss for the 12 months ended March without providing a specific number.
Toshiba on May 8 withdrew forecasts and canceled its year-end dividend. Later it widened aprobe of accounting for construction projects to cover the entire company. Hisao Tanaka stepped down as president in July along with his two predecessors.
In the scandal's wake the company appointed a six-member committee charged with revitalizing the board and preventing future improprieties.
"Muromachi was chosen as president precisely because we find ourselves in an emergency" Itami said at a press conference on Tuesday. "We judged that his management skills are necessary for the company at this time."
Muromachi who holds a graduate degree in engineering from the prestigious Waseda University has spent much of his 40 years with Toshiba in the company's semiconductor business. He ran the operations since 2004 overseeing the shift to flash memory and became a director in 2013.
The chip unit making memory light-emitting diodes sensors and other components is the company's most profitable business. It was left largely untainted by the accounting scandal that spanned personal computers nuclear hydroelectric wind-power equipment air-traffic control and railway systems.
Toshiba initially uncovered irregularities related to "percentage of completion" estimates used on infrastructure projects. It then appointed a third-party committee to expand the investigation to the rest of the company.
The third-party report released on July 21 detailed various practices that led to overstatement of profits linking them directly to former presidents Tanaka Norio Sasaki and Atsutoshi Nishida. Muromachi's name wasn't mentioned.
Toshiba also announced board changes Tuesday increasing the number of independent directors to seven from four.
The company said July 29 that Itami would lead the renewal committee with external directors Ken Shimauchi Kiyomi Saito and Sakutaro Tanino. An accountant and a lawyer were also part of the group.
No charges have been filed against Toshiba or its executives.
The company has said eight executives will have their pay lowered by 40 percent for the three months from July while Muromachi took a 90 percent cut from this month.
Toshiba last month sold its 4.6 percent stake in Finnish elevator and escalator maker Kone citing the need to improve the balance sheet. It will book a gain of about 113 billion yen from the sale.
The company is a pillar of Japan Inc. making everything from nuclear power plants to laptop computers and memory chips. During its 140-year history the company has built up holdings in more than 300 affiliates partners and customers a common practice in Japan.
"I feel grave responsibility for not being able to prevent this state of affairs" Muromachi said Tuesday. "In this time of greatest crisis since Toshiba's founding I plan to focus first and foremost on putting in place prevention policies."