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Fuji Xerox AU linked to $450m Fujifilm scandal

Wednesday, 14 June 2017
By Graham Osborne

Fuji Xerox headquarters in Yokohama, Japan

An independent investigation into accounting irregularities at Fuji Xerox New Zealand has uncovered similar ‘improper practices’ at Fuji Xerox Australia. Parent company Fujifilm Holdings estimates the losses will total $A450 million.

At least four executives at Fuji Xerox in Japan, including the chairman, are stepping down following the investigation.

Fujifilm, which owns 75% of Fuji Xerox, estimates total losses from improper accounting at its Australasian units of ¥37 billion ($A450 million), up from the original ¥22 billion ($A260 million) estimated in April.

President and COO Kenji Sukeno and other executives gave apologetic bows at a news conference to announce the findings. “We will strengthen corporate governance at Fuji Xerox,” Sukeno said.

Fujifilm president Kenji Sukeno (second from right) and Fujifilm officials at the news conference.

An independent team of lawyers and accountants appointed to investigate accounting practices at the Australasian subsidiaries found that both Fuji Xerox NZ and Fuji Xerox Australia had inflated revenue figures associated with certain leasing transactions. The investigation found that Fuji Xerox NZ boosted its sales numbers by realising them prematurely, and that this was done because there were financial incentives for the managing director and employees of FXNZ.

“At FXNZ, the board of directors did not function effectively, there was a concentration of authority with the MD of FXNZ and the business management process lacked transparency,” said Fujifilm in a statement.

The audit concluded that Fuji Xerox managers had overstated revenue by a total of 37.5 billion yen, or about $A450 million, in the five years through 2016.

In a statement released late Tuesday, Fuji Xerox Australia said it “takes the committee’s findings very seriously and is committed to resolving past issues and ensuring that there is no recurrence. Fuji Xerox (Japan) will renew its management structure and discuss counter measures to ensure the group to adhere to the highest standards of corporate governance. For Fuji Xerox and its affiliates, the top priority is on regaining trust from the stakeholders.”

Fuji Xerox Australia MD Sunil Gupta, appointed last year to replace Neil Whittaker, speaks at a Fuji Xerox event at last month's PacPrint in Melbourne.

A whistleblower inside Fuji Xerox, whose name has not been released, initially identified problems at the New Zealand unit in 2015, according to a report in The New York Times:

How much a customer pays Fuji Xerox for a leased photocopier depends in part on how heavily the customer uses the machine. When the billings fell short of projections, managers in New Zealand and Australia reported inflated numbers in order to meet revenue targets, the committee of investigators found.

Under the MSAs, sales equivalent to the price of the copy machines are recorded as a single sale as a capital lease upon installation of equipment during the fiscal year, and following that, the sales price is recovered as a copying service fee determined by multiplying the copy unit price, determined according to the monthly target volume, with the actual number of sheets copied.

Consequently, there were many transactions where receivables could not be recovered because, among other things, the copy volume did not reach the target set at the time of executing the contract and the minimum usage fee was not clearly set, and that became constant practice.

Fuji Xerox announced the resignations of Tadahito Yamamoto, the chairman; Haruhiko Yoshida, a deputy president; and two directors, Katsuhiko Yanagawa and Jun Takagi. They will leave their positions June 22.  Shigetaka Komori, chairman and CEO of Fujifilm Holdings, plans to take on the dual role of chairman of both the parent company and Fuji Xerox. Senior executives will also take temporary pay cuts of between 10 per cent and 30 per cent.

New Zealand’s Serious Fraud Office said it intends to ‘review’ the independent report.

“There has to be something rotten in New Zealand when what could potentially be one of the country’s largest corporate frauds has seen the government, the establishment, and law enforcement deliberately bury their heads in the sand,” said NZ First leader Winston Peters.

 

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3 Responses to “Fuji Xerox AU linked to $450m Fujifilm scandal”

  1. June 14, 2017 at 1:40 pm,

    Fred
    said:

    Wasn’t it obvious that the numbers would be higher than the ones from NZ?
    They sold contracts on a volume basis and can’t enforce the volume until the full term is up.
    Therefore lower revenue at times and I doubt they will succeed getting paid in full at the end.
    The contracts are not unethical, but kicked the competition out, who is probably now laughing anyway.
    Well done Fuji Xerox!

  2. June 14, 2017 at 10:29 pm,

    Tony
    said:

    Been in this industry a long time in the finance area. The whole industry is in denial on its future revenue realizations. Forever decreasing its service revenues with rediculously low service cost per copy rates, just to achieve another sale, has seriously undermined the whole industry in Australia. Its inevitable that the industry is going to fold whilst it ignores the future forecasting of expected revenues on today’s sold service rates. Once was a professional industry but now not so professional. I hope some brave clever people remain inside these print companies to fix the core business profitability and stave off voluntary administration.

  3. June 15, 2017 at 4:03 pm,

    NZ Confidential
    said:

    OK. Lets add to this. There is still a lot of questions to answered by FX. Why are printers now having to compete with FX for business and you can only get business from these clients if you have FX gear. Isn’t that anti-competitive? We go on about the FX copier business and they’ve done just as much damage in the wide format market. They should be boycotted by everyone! Here in NZ National are losing my vote over this. Winston is picking it up. How can they ignore what has gone on. The SFO needs to move in and take action. In a country where the IRD are cracking down on one man band tradies for cash jobs and letting companies like this get away with millions. Where does it end!

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