Toshiba hid Westinghouse's losses even while under probe for accounting fraud

Toshiba paid about ¥600bn for Westinghouse in 2006, and presidents Atsutoshi Nishida and Norio Sasaki publicly promised more than 30 new reactor orders and a ¥1-trillion nuclear business. After the 2011 Fukushima accident the global nuclear business cooled, but Toshiba's management kept telling the market the atomic business was fine — because admitting otherwise would force consolidated writedowns of possibly several thousand billion yen on a fragile balance sheet.

Westinghouse's own accounts told another story: standalone impairments of $926 million in fiscal 2012 and about $400 million in fiscal 2013 — pushing the subsidiary into the red in both years. Toshiba called it 'no impact on our consolidated accounts and no accounting problem', and disclosed none of it until Nikkei Business, armed with internal emails and documents, put the finding to the company on the morning of November 9, 2015. 'Indeed, as you point out,' the PR officer confirmed.

Nikkei Business published the scoop on November 12, 2015, seconds after the market closed; Toshiba all but admitted it the next day. The Tokyo Stock Exchange called the discrepancy corporate-wide concealment that breached timely-disclosure rules — on top of the 'securities on alert' designation from the July overstatement scandal. On November 17 Toshiba issued a release admitting the goodwill impairment. In July 2016, prosecutors told the SESC that criminal charges against the three former presidents would be difficult.

Admitting Westinghouse's losses would have forced consolidated impairments large enough to sink an already weak balance sheet into the red.

Management had publicly promised a nuclear boom — 30 reactors and ¥1 trillion in sales — that Fukushima had made unrealistic.

Toshiba was already a 'securities on alert' stock over the 2015 overstatement, so any new bad news risked delisting.

An accounting treatment kept Westinghouse's standalone impairments out of consolidated results, so the concealment could continue quietly.

Hiding a loss to avoid a writedown only scales the loss: the concealment, not the plant economics, is what ends careers and nearly ends a listing.

The scoop became the basis of Nikkei Business's book 'Toshiba: Funshoku no Genten' (The Origin of the Cover-up), published in July 2016. The Tokyo District Public Prosecutors' special investigation department conveyed to the Securities and Exchange Surveillance Commission that criminal prosecution of the three ex-presidents would be difficult, and the nuclear losses surfaced for real in 2017, forcing the restructuring that ended in Toshiba's 2023 take-private.