Sanyo's Legal Problems Are Bad News for Goldman

Sanyo Electric Co. announced today its accounting practices are being investigated by the Securities and Exchange Surveillance Committee, sending shares down a whopping 21% in Tokyo trading. Wall Street Journal says the news has serious implications for Goldman Sachs, which helped bail Sanyo out of its difficulties last year by purchasing more than a billion dollars worth of preferred shares. It is believed Goldman was close to selling off its stake in Sanyo at a large profit. A Sanyo spokesmen said only, "We are fully cooperating with an inquiry" without elaborating. The charges, reported in the Asahi Shimbun this morning, state the company misrepresented its F2004 losses by as much as $1.1 billion. Had the company reported honestly, it would likely have been in the red for F2004. Fukoku Capital Management analyst Tomokatsu Mori: "The company lacks management competence."

Sources: Wall Street Journal, Bloomberg, AP
Commentary: Polarization Creates Clear Winners and Losers In Japan's Recovery Tide • Sanyo to Voluntarily Delist from Nasdaq
Stocks/ETFs to watch: Sanyo Electric Co. (SANYY.PK), Goldman Sachs Group (GS). Competitors: Sony (SNE), Toshiba (TOSBF.PK). ETFs: iShares MSCI Japan Index (EWJ)

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