Case 40: Kanebo (Japan, 2005)

• Prof. Dr. Klaus Henselmann
• Dr. Stefan Hofmann

By the late 1990s, Kanebo Ltd. ranked among Japan’s largest public corporations. It had started making cotton in the 19th century and went on to become the number two in Japan’s cosmetic market. Its principal operations included the manufacture and sale of a long line of cosmetics, as well as apparel, textiles, pharmaceuticals, toiletries, and food products. However, in July 2005, Japanese law enforcement authorities arrested three Kanebo executives, including the company’s president, Takashi Hoashi. Allegedly, the executives conspired to hide losses in a nine-year effort to disguise Kanebo’s financial decline. Unfortunately, the Kanebo incident came shortly after the discovery of a series of accounting frauds in companies in the Japanese IT industry, and the frauds in Japan reminded many observers of the “Enron crisis” in the United States. Japan’s business press quickly referred to the Kanebo fraud as “Japan’s Enron”.

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