NIDEC's 'legacy liabilities', special audits and planned disposals

analysisFrom around 2011 to around June 2020, the committee found, an employee whom Shigenobu Nagamori had transferred into the Internal Audit Department in February 2011 as 'General Manager in charge of Special Audits' ('Mr. A' in the report) conducted 'special audits' of suspected improper accounting and embezzlement on Nagamori's orders, reporting only to Nagamori and a limited number of executives and sharing the details with neither the Internal Audit Department nor the auditor, PwC Kyoto. In large cases Mr. A sometimes had improper accounting addressed 'in a planned manner' over several fiscal years instead of corrected at once, and Nagamori, made aware of this through his reports, accepted it. Nagamori told the committee that had the Internal Audit Department investigated instead, 'the information would have been shared with PwC Kyoto, and it would have escalated into a major issue', that it was better 'to correct the improper conduct without making it public, and to give employees who are remorseful a second chance', and that while problem assets should be dealt with immediately he 'accepted this sometimes' when Mr. A asked for planned handling for struggling group companies. The committee could not interview Mr. A, who had left NIDEC and did not respond, and recovered only a very small portion of his reports; its finding is not a court decision. NIDEC's annual securities report for the year ended 31 March 2026 states that it has built a structure, through at least quarterly reporting by the Internal Audit Department to the Audit and Supervisory Committee (held in April and July 2026), so that activities of unclear status such as the past special audits, and practices such as deleting parts of interview minutes, are never repeated. ^{1 2}

analysisThe committee found that Mr. A also reported special-audit results to Hiroshi Kobe, less often and in less detail than to Nagamori, and, for domestic group companies, to the executive officer responsible for the Group Companies Business Management Department, but shared nothing with the Internal Audit Department, whose audits skipped matters already covered by special audits. An executive officer who had been a full-time corporate auditor and Audit and Supervisory Committee member knew of the special audits, but no full-time corporate auditor or committee member told the outside officers; he said that at the time it was 'unthinkable' to explain Mr. A's covert role to them. The committee drew these findings from interviews and documents without being able to interview Mr. A, and receiving his reports is not in itself a finding against Kobe, whose position the committee assesses separately. ¹

analysisThe scale of the special audits is known mainly from Mr. A's own description. According to the committee, a February 2019 document in which he explained the post to Hiroyuki Yoshimoto, then representative director and president, stated that 'over eight years of special investigations, approximately 300 cases of misconduct involving approximately 35 billion yen have been identified, and responsive measures and write-offs have been implemented', and listed as an achievement that there had been no overlap with findings of the outside auditors or internal audits. These figures are Mr. A's account, not verified totals, and the committee said the overall picture remains unclear because most of his reports were not found. Yoshimoto told the committee he understood Mr. A was investigating misconduct on a special assignment from Nagamori, 'but he was secretive, and I didn't know specifically what he was doing.' No weekly reports to Nagamori are indicated after 28 June 2020. After suspicions arising from the February 2020 Nidec Servo case, which Mr. A denied and which were not confirmed, he received a formal written warning, became an executive consultant on 1 September 2020 with his pay cut by 40%, and left NIDEC in June 2022. ¹

analysisThe committee describes a special audit report on all 'legacy liabilities' of the Nidec Copal (NCPL, now Nidec Precision) group, attached to an e-mail of 20 July 2018, which valued them at ¥11,351,100,000 at the end of March and ¥11,017,000,000 at the end of June, planned their amortisation with the highest priority on eliminating the risk of external leaks, and put 11 assets under 'special audit standards: black', a category covering situations such as intentionally deferring write-downs, failing to recognise allowances, deferring expenses and accelerating sales. When NCPL's CFO and others explained the report to PwC Kyoto on 7 and 14 March 2019, some explanations were not based on the facts, the committee found: an inflation of Shiojiri Factory inventory unit prices, used from March 2014 to June 2018 to improve profit, was attributed to moving production from the Philippines to China. According to Mr. A's weekly report of 17 March 2019, NCPL's basic explanation was that it had found errors and revised them within the fiscal year, so internal controls had not been overridden, and that 'black standards' meant the priority order for revisions; the committee calls treating these items as errors inconsistent with the facts. The weekly report stated that the auditors had accepted the explanations, and in the draft list of 'legacy liabilities' shared with PwC Kyoto on 20 March 2019 the Shiojiri inventory accounting was deemed 'appropriate' and NCPL's other 'legacy liabilities' were treated as 'errors'. The NCPL officers are not named, and this is not a court or regulatory decision. ¹

analysisIn October 2019, the committee found, Mr. A reported to Nagamori that a group company had about ¥2.1 billion of 'legacy liabilities' as of the second quarter of fiscal 2019 (July–September 2019), including items clearly requiring immediate resolution such as 'recording of fictitious die sales', and submitted an amortisation plan to reduce them to about ¥1.5 billion by the end of fiscal 2019 so as to keep 'eliminating the risk of external leaks'. Nagamori commented that 'achieving healthy finances is an urgent task' but approved the plan. He also approved addressing some Nidec Precision (formerly Nidec Copal) facilities 'in a planned manner' although he was aware that they required impairment. Nagamori told the committee his position was that problem assets should be dealt with immediately, but that he 'accepted this sometimes' when Mr. A asked for planned handling out of compassion for struggling group companies. The committee found no facts indicating that Nagamori instructed or directed the improper accounting, and could not interview Mr. A. ¹

analysisAccording to the committee, NIDEC launched the 'Asset Revitalization Project' in November 2016 under the Internal Audit Department to collect reports of 'legacy liabilities', the company's internal term for assets of questionable value arising from avoided impairments and similar measures taken to meet targets, and to dispose of them. The committee found, from internal project materials, that write-downs had to be 'self-funded' from each unit's or group company's own profits while still meeting aggressive targets. Progress was reported quarterly to management, beginning with Shigenobu Nagamori, including reports of a general downward trend (for example on 23 June 2022) even though new legacy liabilities kept arising, and the Internal Audit Department ended the project during fiscal 2022 (year ended 31 March 2023) because disposition did not proceed as anticipated. ¹

analysisAccording to the committee, on 12 February 2017 Nidec Precision (NPCJ) told Nagamori and the Executive Officer Responsible for Group Companies that only about ¥1.3 billion of its 'legacy liabilities' would be expensed in the fourth quarter of fiscal 2016 (January–March 2017) and that the small-motor manufacturing equipment for 'Company α' and the equipment for 'Projects X and Y', which the report says made up the bulk of NPCJ's 'legacy liabilities' (at least ¥8.0 billion), would be repurposed or sold to avoid impairment. No repurposing or sale followed beyond about ¥300 million, and from the absence of any record of it the committee concluded that 'Mr. Nagamori and the Executive Officer Responsible for Group Companies approved the deferral of losses by leaving those assets idle without performing impairments', describing such planned handling as equivalent to delaying the rectification of improper accounting. In the fourth quarter of fiscal 2022 the remaining ¥2.45 billion exceeded NPCJ's structural-reform budget of ¥1.29 billion and was left to 'self-funding', so the losses were still being deferred through depreciation when the committee began its work. This is the committee's conclusion, not a court decision. ¹

analysisThe committee quotes a status report on the project dated 22 December 2018, which was attached to one of the e-mails found in an outside law firm's forensic review and shared with PwC Kyoto. It stated that in the first half of fiscal 2018 (April–September 2018) assets needing revitalisation totalling ¥13.72 billion, mostly high risk, had been added at AMEC, ACIM, NCPL and NSTJ: ¥8.81 billion at AMEC (including profit of ¥2.37 billion on ¥4.31 billion of sales with insufficient basis for recognition and ¥3.61 billion of accelerated profit recognition from deferred costs), ¥1.93 billion at ACIM, ¥980 million at NCPL and ¥1.98 billion at NSTJ. The categories are the internal document's own risk labels, not findings of improper accounting for each item. ¹

analysisThe committee also records that the AMEC CFO who took office in June 2018 was told by the accounting head of a Chinese subsidiary that, on the former AMEC CFO's instructions, labour, utility, rent and other expenses had been deferred as book-closing measures. He identified 'legacy liabilities' with a profit-and-loss impact of about ¥6.3 billion across AMEC's sites, disposed of about ¥1.8 billion in the third quarter of fiscal 2018 (October–December 2018) and reported the remaining ¥4.5 billion to the Asset Revitalization Project. He told the committee that the headquarters CFO instructed him to dispose of them only within the scope that would still allow AMEC to meet its performance target; after the ACIM and AMEC cases came to light, it was decided to dispose of all 'high risk' legacy liabilities in fiscal 2018, including AMEC's ¥4.5 billion. The officers are not named, and this account recorded by the committee is not a court or regulatory decision. ¹

analysisThe 2019 outside investigation's forensic review also turned up e-mails suggesting similar improper accounting at other NIDEC Group sites ('Latent Issues'), which were shared with PwC Kyoto. A draft list of 'legacy liabilities' then given to PwC Kyoto, with an explanation of the Asset Revitalization Project by the headquarters CFO and accounting general manager, put those needing immediate accounting treatment at about ¥6.3 billion as of the third quarter of fiscal 2018 and stated that it could not be ruled out that a considerable number had arisen from intentional misconduct. Confirmation of 50 representative Latent Issues, completed by 13 May 2019, found seven instances of improper accounting treatment with a total impact of ¥1.066 billion, considered corrected by the end of fiscal 2018. NIDEC concluded that these issues affected fiscal 2018 profit before income taxes and net profit by less than 5% and did not require correction of past financial statements, and PwC Kyoto issued an unqualified opinion on the fiscal 2018 results. This is the committee's description of earlier internal materials and conclusions, not a court or regulatory decision. ¹

analysisThe structural reforms of the fourth quarter of fiscal 2022 (January–March 2023) were developed by the headquarters CFO, who is not named, and approved by Shigenobu Nagamori, the committee found. Business units and group companies reported about ¥166.2 billion of 'legacy liabilities', and to keep full-year operating profit at no less than ¥100 billion the CFO and the Accounting Department sorted them, with Nagamori's approval, into about ¥56.6 billion of 'Structural Reform Liabilities' to be disposed of in that quarter and about ¥109.6 billion of 'Planned Disposition Liabilities' to be handled by each unit through 'self-funding' from fiscal 2023. On 24 April 2023 NIDEC announced fiscal 2022 sales of ¥2.2243 trillion and operating profit of ¥100.1 billion, presenting structural reform expenses of about ¥75.7 billion as part of a profit-structure reform aimed at a V-shaped recovery; the committee found no trace in board or Audit and Supervisory Committee minutes of a particular report on the reforms. These are interim findings of the company-appointed committee, which worked without compulsory powers, not a court or regulatory decision. ¹

analysisAmong the items reported as 'legacy liabilities' but classed as Planned Disposition Liabilities, and so not disposed of, were NPCJ's unimpaired Projects X and Y equipment, company housing at Nidec Instruments (NIST) on which impairment was improperly avoided, and inventory at Nidec OKK (NOKJ) on which write-downs were improperly avoided. The committee said that setting an upper limit for disposal before classifying the items reversed the logical order and let in items that should have been disposed of immediately. It did not find that the newly appointed CFO knew this, but said it 'cannot be denied' that he was partly responsible, while holding that he deserved a certain degree of recognition for persuading Nagamori, who insisted on self-funding and instructed a V-shaped recovery in fiscal 2023, to allow the reforms. Information on the unprocessed items and their planned disposition was not shared with PwC Kyoto: an Accounting Department member said NIDEC did not consider this inappropriate and wanted to avoid unnecessary discussions with the audit firm, and the general manager of the Corporate Administration & Internal Audit Department said the aim was to gather all the accounting data internally, carry out the planned dispositions and explain the situation to the audit firm once a clear explanation could be given. On 4 December 2023 an executive vice presidents' meeting confirmed planned dispositions of ¥66.4 billion of unprocessed and newly incurred 'legacy liabilities' for the second half of fiscal 2023 to fiscal 2025; funded from the units' own results, they did not proceed as planned. The CFO is not named, and these findings are not a court or regulatory decision. ¹

analysisThe committee found that the 'Summary of Planned Dispositions', compiled by a project begun in March 2023 to prevent the recurrence of structural reform expenses, was likewise not shared with PwC Kyoto; in an August 2023 interview the general manager of the Internal Audit Department said, 'If the audit firm were to find about this list, it would become a serious problem'. At the 4 December 2023 meeting Hiroshi Kobe, then president, said he wanted everything, including the legacy liabilities, made transparent, adding that afterwards 'certain items might be kept confidential from our accountant for specific reasons'. Kobe told the committee his point was to make all problems clear within the company and that 'it was not my intention to hide information from the accountants'; the Accounting Department member said the intent of not sharing was to avoid unnecessary discussions with the audit firm. The finding concerns information-sharing with the auditor, and the report quotes Kobe's remark without making a finding against him. ¹

analysisThe committee found that in the fourth quarter of fiscal 2023 (January–March 2024) NIDEC recorded ¥59.8 billion of structural reform expenses for AMEC's traction motor business, consisting of impairments of parts and equipment and other measures linked to a shift towards parts supply, but carried out no group-wide structural reform as in fiscal 2022, and the planned dispositions of the remaining 'legacy liabilities', which had to be funded from the units' own results, did not proceed as planned. In fiscal 2024 Mitsuya Kishida and the headquarters CFO repeatedly explained to Shigenobu Nagamori the need for structural reforms in the fourth quarter, but he insisted that operating profit of ¥240 billion was essential and refused to approve them, so they were not carried out. The committee states that no facts were discovered indicating that Kishida instructed, directed or condoned the improper accounting; these are interim findings of the company-appointed committee, not a court or regulatory decision. ¹

analysisAccording to the committee, in March 2025 Kishida, the headquarters CFO, the CPO and others decided to dispose of 'legacy liabilities' by recognising about ¥49.2 billion of structural reform expenses group-wide, including about ¥25.8 billion of one-time loss risks in the AMEC Organic Business identified by then. When Kishida proposed this on 24 March 2025 at the NKK meeting, the weekly meeting of Nagamori, Kobe and Kishida named after their surnames, Nagamori argued that they should be handled through 'self-funding' and did not approve; the minutes record: 'FDR Nagamori: The operating profit must not fall below 240 billion yen even by 1 yen this fiscal year. Raising the stock price is the top priority.' Drawing on the minutes and interviews, the committee concluded that, although Kishida repeatedly explained the need, Nagamori's rejection meant that liabilities which should have been disposed of in the fourth quarter of fiscal 2024 (January–March 2025) were not, without Kishida being aware of it. This is the committee's finding, not a court decision. ¹