Toshiba’s serious legal troubles could cost the company billions

In a scandal that will most likely result in the company’s board members and CEO being forced to resign, Toshiba is being investigated for overstating its profits over the past few years. Depending on what the government probe discovers, the company could suffer as much as $3.2 billion in legal charges, which is the last thing that the struggling Japanese company needs right now. 

Toshiba Corp expects 300-400 billion yen ($2.4-3.2 billion) in charges related to improper accounting in an expanding probe that is set to force Chief Executive Hisao Tanaka to step down, sources familiar with the matter said on Wednesday. The Japanese conglomerate has hired a third-party committee to investigate past book-keeping practices which sources say led to profits being overstated by more than 170 billion yen. That’s more than triple Toshiba’s initial estimate of around 50 billion yen. The charges include six years of overstated profits uncovered by the committee, as well as various writedowns, the people told Reuters. A Toshiba spokesman said it has not yet compiled any estimates of potential charges. The company has been unable to finalize its accounts for the past financial year and suspended its year-end dividend payout due to the investigation. It was not clear how much of the charges would be booked in the last year. Its net income in the last fiscal year through March 2014 was 51 billion yen.