Tokyo Prosecutors Indict Kobe Steel Over Data Falsification

(Bloomberg) -- Tokyo prosecutors indicted Kobe Steel Ltd. over the faked data crisis that rocked Japan’s manufacturing industry last year.

The company was indicted on suspicion of breaching Japan’s unfair competition law in connection with falsified inspection reports for the year through September 2017, the Tokyo District Public Prosecutors Office said Thursday in a statement.

Kobe Steel admitted in October that employees misrepresented the strength and durability of parts shipped to hundreds of customers, including Toyota Motor Corp. and Boeing Co., sparking similar revelations from materials suppliers including Mitsubishi Materials Corp. and Toray Industries Inc. that have tarnished Japan’s manufacturing reputation.

Kobe Steel acknowledged the indictment in a statement and said it is implementing measures to prevent a recurrence of the scandal.

Prosecutors and police last month searched Kobe Steel’s headquarters in Kobe and Tokyo. The nation’s third-biggest steelmaker said in March that an external probe had found its misconduct around quality controls dates back to the 1970s, and that more than 40 people in managerial positions had been aware of the faked data.

A firm found guilty faces a fine of up to 300 million yen ($2.7 million) under the unfair competition law. Local media reported this month that prosecutors are not planning on seeking criminal charges against individuals.

The scandal also triggered a U.S. probe and three civil lawsuits, clouding the outlook for the 112-year-old firm even though no safety issues were reported by customers. President Mitsugu Yamaguchi told shareholders last month that talks with the U.S. Department of Justice were ongoing and that he didn’t know how long the investigation would last.

Kobe Steel closed 1.6 percent higher at 1,043 yen in Tokyo, leaving its shares 24 percent below the level seen before it revealed the scandal in October.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net;Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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