Chasing Nidec: Lessons From Olympus and Toshiba

In a previous article, we explained what it means when an audit firm issues a Disclaimer of Opinion and when a company is designated as a "Security on Special Alert," as well as the potential impact they could have on Nidec. This installment compares the Nidec situation with two major accounting fraud cases that caused a stir in Japan: the Olympus scandal and the Toshiba scandal.

Fifth in a Multi-part Series

Follow the series

What Was the Olympus Scandal?

Olympus Corporation was a major Japanese company listed on the First Section of the Tokyo Stock Exchange. Then, the Olympus scandal revealed that the company had been concealing losses of approximately ¥117.7 billion ($753.2 million) over a period of more than ten years.

According to the third-party committee's report, from the 1990s onward, Olympus deferred recognizing losses on unrealized losses related to securities investments and other investments.

In an effort to eliminate these unrealized losses, the company had funds purchase the loss-bearing financial products at their book value, among other measures, effectively further deferring the losses. Olympus also channeled enormous acquisition funds and FA (financial advisor) fees to those funds, amounts that did not reflect economic reality, in order to plug the hole created by the losses.

*Nidec President Mitsuya Kishida holds a press conference in Tokyo on January 28. (©Sankei by Takumi Kamoshida)*

The deferred losses added up to approximately ¥117.7 billion. In total, the figure was about ¥134.8 billion ($862.6 million), including maintenance and related costs.

Tokyo Stock Exchange's Handling of Olympus Shares

As shown in the table above, Olympus shares were designated as Securities Under Supervision (Confirmation) on November 10, 2011, after the company failed to submit its quarterly securities report by the legal deadline.

Following the release of the third-party committee's investigative report on December 6, the Tokyo Stock Exchange also designated Olympus shares as Securities Under Supervision (Examination). It said the shares could ultimately be delisted, depending on the results of its examination.

Geothermal Power Through the Lens of a Famous Hot Spring City

Exchange Watchlist: What the Labels Mean

A "Securities Under Supervision" designation is applied by the exchange to alert investors when a listed company may fall within its delisting standards. Stocks are classified as "Examination" in cases such as materially false statements in securities filings. Other situations fall under "Confirmation." If, after review, the exchange determines that the delisting criteria are met, the shares are designated as Securities to Be Delisted, leading to delisting approximately one month later.

However, on January 21, 2012, Olympus was removed from supervised status and instead designated as a Security on Alert. The exchange said only a limited group was involved in the losses and their cover-up. It found that the misconduct did not repeatedly and materially mislead investors about Olympus's profitability or performance trajectory.

As a result, it concluded that investors' decision-making had not been distorted to a degree warranting delisting.

Securities on Special Alert is a designation whose name was changed in January 2024 to Securities on Alert. The change was in terminology only, and the designation is substantively the same. For the significance of this designation, please refer to the previous installment, "Chasing Nidec: What Audit Disclaimers and Special Alert Status Really Mean."

On June 11, 2013, Olympus also had its designation as a Securities on Special Alert lifted, and ultimately avoided delisting.

It should also be noted that in the Olympus case, the audit firm did not issue an adverse opinion or a disclaimer of opinion.

Olympus's Civil Liability

Although Olympus ultimately avoided delisting, a large number of damage claims (compensation lawsuits) were filed against the company.

Based on publicly available information, the following lawsuits have been confirmed.

Other Liabilities Imposed on Olympus

In addition, on July 11, 2012, Olympus received an order from the Financial Services Agency (FSA) requiring payment of an administrative penalty in the amount of approximately ¥191.82 million ($1.23 million).

Further, in the criminal case, Olympus was sentenced to pay a ¥700 million fine ($4.48 million).

What Was the Toshiba Scandal?

The Toshiba scandal refers to a case dating back to the time the company was listed on the First Section of the Tokyo Stock Exchange. Over seven years, the company overstated pre-tax profits by a total of approximately ¥224.8 billion ($1.44 billion).

According to the third-party committee report, Toshiba inflated profits using the following improper accounting practices:

Discretionary application of the percentage-of-completion method, leading to underestimation of costs, and delayed recognition of provisions for construction losses
For projects expected to incur losses, delayed booking of allowances/provisions, and impairment (valuation) losses
Manipulation of inventory valuation

A summary of how the Toshiba scandal came to light and what followed is shown in the table below.

Exchange Measures Against Toshiba Shares

On September 7, 2015, Toshiba Corporation filed amended securities reports and quarterly reports covering the period from the fiscal year ended March 2010 through Q3 of the fiscal year ended March 2015.

From the fiscal year ended March 2009 through Q3 of the fiscal year ended March 2015, Toshiba had engaged in improper accounting, including the deferral of losses.

Over that period, the company overstated continuing operations pre-tax profit by a cumulative ¥224.8 billion ($1.44 billion).

*Toshiba's headquarters in Minato Ward, Tokyo.*

It also overstated net profit by a cumulative ¥155.2 billion ($993 million).

In response, the Tokyo Stock Exchange and the Nagoya Stock Exchange designated Toshiba shares as Securities on Alert on September 15, 2015. They cited serious problems in the company's internal control systems. In their view, the situation called for substantial improvements.

From Special Alert to Clearance

One year later, on September 15, 2016, Toshiba submitted a Written Confirmation of Internal Management System to the two exchanges.

However, even after the alert designation, issues continued to surface, including problems in accounting treatment. In view of the ongoing need for further efforts to ensure thorough compliance and manage affiliated companies, and the necessity to continue monitoring progress of these improvement initiatives, the designation was extended on December 19, 2016.

Thereafter, on March 15, 2017, one year and six months after the Securities on Alert designation, Toshiba was deemed to face a risk of delisting and its shares were designated as a Securities Under Supervision (Examination).

However, after reviewing the Written Confirmation of Internal Management System submitted that same day, the exchanges found that Toshiba had made meaningful improvements to its internal controls. As a result, on October 12, 2017, both the Securities on Alert designation and the Securities Under Supervision (Examination) designation were lifted and Toshiba avoided delisting.

That said, Toshiba later voluntarily delisted in December 2023.

Toshiba's Civil Liability

Like Olympus, Toshiba Corporation ultimately avoided delisting. Even so, numerous damage claims were brought against the company.

Only a limited number of published court decisions are available. However, there are at least eight, including a Tokyo District Court judgment dated May 13, 2021. Many cases, meanwhile, are still pending.

In addition, the following settled cases can be confirmed from publicly available materials. (This is limited to those filed in Japan.)

Comparison with the Nidec case

Both Olympus and Toshiba ultimately avoided delisting. In that respect, they share a key similarity with Nidec: each had their shares designated either as Securities Under Supervision or as Securities on Alert (now called Securities on Special Alert).

Timing and Disclosure

Even so, the Olympus and Toshiba cases importantly differ from the Nidec case. In both Olympus and Toshiba, the designations came after the third-party committee's investigative report had been released. By the time the designation was imposed, the substance of the false statements had already come to light, and the companies were presumably already working on measures to prevent recurrence.

Nidec shares, by contrast, were designated as Securities on Special Alert issue on October 28, 2025. Yet even in early February 2026, roughly three months later, the findings of the third-party committee had still not been made public.

Without clarity on what the improper accounting was and what caused it, it is difficult to implement recurrence prevention measures or strengthen internal controls. That makes it more likely than in the Olympus or Toshiba cases that Nidec may be unable to improve its internal control systems within the required timeframe.

In the Olympus case, roughly one month passed between the establishment of the third-party committee and the release of its findings. In the Toshiba case, the special investigation committee's investigation took about one month, and just under two months passed between the establishment of the third-party committee and the release of its findings.

By contrast, at Nidec Corporation, the third-party committee was established on September 3, 2025. As of early February 2026, more than five months later, the committee's findings still have not been made public. A schedule released by Nidec in late January 2026 states that a preliminary report from the committee is expected by late February 2026, with a final report to follow thereafter.