On July 8, 2015, an email from a whistleblower identified only as “Tony Night” was sent to members of the company’s upper management. The email pointed out cases of inappropriate accounting practices at FXNZ involving the use of inflated target volumes for MSAs, resulting in over-stated revenue.
On July 24, 2015, an internal audit was subsequently performed on FXNZ. The audit revealed that revenue had been over-stated due to the use of MSAs with inflated target volumes, as had been pointed out in the whistleblower email.
APO sent a notification on September 3, 2015 prohibiting the use of MSAs to both FXNZ and FXA, where Mr. A had been working as its MD since April 2015.
Moreover, the report stated that the “double recording of advance sales, the recording of fictitious sales, the fictitious recording or deferral of cost of sales or expenses” and other accounting practices known as ‘macro adjustments’ were broadly and inconsistently implemented at FXNZ.
“It is considered that FXNZ utilised these macro adjustments in order to achieve monthly performance targets,” the report said.
The report suggested that the historical use of inflated MSAs by Fuji Xerox in the local market was a primary factor behind subsequent losses at FXNZ. As of mid-2016, it was calculated that FXNZ faced future losses of NZ$70 million.
Later, a Singapore-based law firm that was hired to review the background of large losses at FXAU and FXNZ identified the macro adjustments as being the result of FXNZ’s overly aggressive recording of revenue stemming from Mr. A’s “sales first at any cost” culture, the report revealed.
On March 31, 2016, top tier Fuji Xerox executives discussed the report from the Singapore law firm and measures to deal with the issues raised in the report. It was subsequently suggested that Mr. A. should be dismissed from his position, with Mr. A signing a settlement agreement after being “recommended” to leave on 16 May 2016.
While the report sheds some light on how the Fujifilm Holdings subsidiary found itself in such a tricky financial position, the company is working to shore up investor confidence, with a number of Fuji Xerox executives in Japan resigning from their roles, while others took pay cuts.
“Fuji Xerox Australia advises that the issues highlighted in the report from the Independent Investigation Committee commissioned by FUJIFILM Holdings Corporation, the parent of Fuji Xerox Co., Ltd are historical (fiscal year ended March 2011 to fiscal year ended March 2016) and do not reflect current business practices,” a company spokesperson told ARN.
“Over the last 12 months Fuji Xerox Australia has implemented a robust corporate governance structure to support sustainable and responsible operations. The findings of the report will not negatively affect the level of service offered to customers nor will it impact the company’s ability to fulfil its contractual obligations under existing agreements.”
According to the spokesperson, Fuji Xerox and its affiliates take the committee’s findings “very seriously” and remain “committed” to resolving past issues and ensuring that there is no recurrence.
“For us, the top priority is on regaining trust from stakeholders,” the spokesperson added. “Fuji Xerox Australia will continue to operate as usual with no impact on customer service.”
In addition, Fuji Xerox president and representative director Hiroshi Kurihara told ARN that the Australian subsidiary “has the support of the whole Fuji Xerox.”
"We are committed to rectifying this situation and putting our focus back on our customers, which remains our top priority,” Fuji Xerox Australia managing director Sunil Gupta added. “Our customers and business partners should be assured this does not affect our ability to meet our business commitments.”