Nidec to Sue Founder Over Japan's Largest Accounting Fraud in a Decade

Nidec said on Tuesday that the company had decided to seek damages from founder Shigenobu Nagamori and eight former executives over their roles in an accounting scandal. The fraud is Japan's largest in a decade. Nidec, based in Kyoto, is the world's largest motor parts maker. Nagamori remains the company's second-largest shareholder.

A 250-page report published last week said Nagamori and the former employees should bear civil liability for Nidec's accounting problems. The problems overstated profits by ¥160 billion ($1 billion) across several years. Nidec said the company would examine the compensation amounts and other matters before bringing the lawsuit. The report estimated scandal-related costs for the year ending August 2026 at ¥27.6 billion ($175 million). The report said the executives should repay those costs collectively.

PwC Japan refused last month to approve Nidec's latest accounts, citing the continued involvement of financial controllers responsible for the fraud. The refusal came despite Nidec recording additional impairment charges of ¥632 billion. Accounting concerns first emerged in 2024. The scale began to become apparent in September last year, when Nidec opened an investigation into improper accounting. Nidec's shares fell sharply following the investigation's launch.

The investigation found that excessive pressure from Nagamori prompted business units to overstate revenue to achieve profit targets. The investigation found that this pressure fostered a culture of routinely avoiding impairment losses. Nagamori had been regarded as an exemplar of capitalism in Japan before the scandal emerged. Nidec began in a prefabricated hut in 1973. Nagamori expanded Nidec through acquisitions into the dominant global motor parts maker.

Nidec is urgently seeking to persuade the Tokyo Stock Exchange that the company has reformed internal governance and risk procedures before possible delisting. Nidec's shares have declined more than 18% so far this year. Activist investor Oasis Management has displaced Nagamori as Nidec's largest shareholder. Oasis Management is pressing Nidec to consider going private.