Kanebo tries to save face after scandal
Two years ago, Kanebo, the sprawling and debt-heavy textiles, food
and cosmetics conglomerate at the centre of Chuo Aoyama PwC's present
difficulties, was set to be taken over for 400 billion yen ($4.7
billion) by Kao, Japan's biggest maker of home products. But at the
last moment Kanebo, weighed under by Y520 billion of debt, reneged on
Rather than selling to Kao, Kanebo turned to the Industrial Revitalisation Corporation of Japan (IRCJ).
The state-run turnaround body spun off Kanebo's profitable cosmetics
division into a separate company. Under the IRCJ, Kanebo was
recapitalised through the sale of its cosmetics division for about Y350
billion, a debt waiver of Y98 billion and a third-party new share
allocation of Y50 billion.
An in-house committee set up by new management in April 2004 found
that former executives had altered shareholder equity figures, delayed
booking expenses and committed accountancy fraud.
The company was last year delisted from the Tokyo Stock Exchange after admitting to accountancy fraud over a four-year period.
The crisis deepened in August last year, when three former Kanebo
executives - including its former president - were arrested for
allegedly cooking the company's books.
The following month, Tokyo prosecutors arrested four accountants at
Chuo Aoyama PwC for allegedly helping Kanebo executives falsify
accounting reports. Chuo Aoyama PwC had audited Kanebo's books for more
than 30 years.
The four accountants were suspected of working together with two
Kanebo executives to produce false consolidated financial statements
showing that Kanebo's assets exceeded its debts in fiscal 2001 and 2002.
In reality, its debts exceeded its assets by Y81.9 billion and Y80.6 billion, respectively.