INDUSTRY

Japanese electronics maker NEC Corp. has launched an internal probe after finding an employee at an engineering unit may have faked business deals and inflated sales by 36.3 billion yen ($310 million) over half a decade. For the current fiscal year ending in March, the amount of inflated sales at NEC Engineering Ltd. is estimated at 13.3 billion yen ($113.6 million), inflating operating income by 9.3 billion yen ($79.5 million), the company said in a statement yesterday. NEC said it has set aside funds to cushion any possible negative impact and does not expect the problem to have a big influence on earnings. "The false transactions relate to certain sales of products, which were actually not delivered and were fabricated by creating fictitious 'round-trip' transactions among (the engineering subsidiary) and its vendors and purchasers," NEC stated. The company added that the employee allegedly "embezzled a significant" amount of money in connection with the fictitious transactions. NEC said it will file a criminal complaint against the employee, who allegedly embezzled money from the transactions. NEC did not identify the employee or say whether he had been fired. "The company is taking this incident, which resulted from fraudulent acts of the employee, seriously, and will take necessary remedial measures to prevent future fraudulent transactions within the NEC Group,'' the company's statement said. The falsified earnings come as NEC battles a drop in profits due to increased competition in the chip and mobile phone industry. In the quarter ended Dec. 31, NEC reported a 47 percent drop in net income to 20.78 billion yen ($117.6 million). The company is restructuring its operations, NEC will form a carrier network business unit to consolidate integration services, hardware and software development, and sales for telecommunications carriers. That unit will be one of five new business units the company is creating including a government, community, financial and carrier solutions business unit; a software business promotions unit; an enterprise solutions business unit; and an IT platform business unit. The company also announced a number of promotions. Kunitomo Matsuoka will serve as sr. vice president, effective April 1. Plus, he will continue to serve as NEC America president. Several more NEC executives are undergoing title changes. Last week, Kaoru Yano, former NEC senior executive vice president, will be promoted to president. He will replace Akinobu Kanasugi, who has been suffering from an illness.