The necessity of establishing a compliance system and enhancing corporate governance to help prevent corporate scandals has become widely recognized in the corporate world. Lawyers who specialize in corporate law are actively involved in compliance-related consulting and also offer a large number of seminars on the subject. As a matter of course, those in positions of authority, such as directors, are expected to take the lead and to exhibit strong leadership in order to effect company-wide change in business practices that can lead to scandals.

However, there is no end to incidents involving false statements in securities reports; cartels and bid-rigging; bribery; product liability and mislabeling; and the leakage of customer information, etc. We therefore have to face the question of how to minimize the various business risks related to a scandal after the fact. As Japanese companies become more international in nature, the issue of corporate scandals also requires international measures, with the response to class action lawsuits in the U.S. in particular posing a major risk.

There is no avoiding the issue of compensation for damages in resolving corporate scandals. In addition to fines and surcharges imposed by the authorities, direct compensation for victims will also become necessary. Compensation for damages may not only be claimed against the company, but individuals such as directors may also be held liable if they have not properly fulfilled their duties.

NERA economists are experts in calculating the amount of compensation for damages in corporate scandals, and have provided consulting services on compensation in numerous lawsuits and disputes. In this seminar, economists from the NERA Tokyo Office explained the methods used to calculate the amount of compensation for damages, the various points of contention concerning compensation for damages in the courts, and how to resolve these points of contention, with the focus on problems that concern false statements in annual securities reports; cartels, bid-rigging and bribery; as well as product liability and mislabeling. In addition, Lawrence Wu, Representative Director of NERA, gave a briefing from an economist's perspective on the forefront issue of class certification, which has always been a major point of contention in the U.S. class action lawsuits that Japanese companies have been increasingly involved in, in recent years.

Program

- Compensation for damages related to false statements in annual securities reports (Tomohiko Yano, NERA)

Since the year 2000, there have regularly been large-scale claims for damages in Japan in relation to false statements made in securities report by companies such as Livedoor, IHI, Seibu Railway, Olympus and Toshiba, and it has become common practice to use event analysis and regression analysis to calculate the amount of damages. This lecture focused on those cases of claims for damages in which court decisions had been issued, and explained event analysis methods, as well as points of contention in individual cases, court decisions, and evaluations made using economic analysis.

- Fines/compensation for damages related to violations of antitrust laws and profit distributions (Hiroaki Ishigaki, NERA)

As Japanese companies become increasing more international in nature, there is growing interest in the issue of company-wide compliance to mitigate the problem of bribery under antitrust laws and FCPA, etc. In the area of antitrust law, companies have to respond to investigations by the authorities involving mainly cartel bid-rigging cases, and face the issue of law suits for damages and direct claims made after the fact. With regard to bribery, there are other regulations besides FCPA, such as anti-kickback laws, as recently highlighted in the Olympus issue. The lecture explained the role of economists in calculating the fines and damages related to bribery issues such as cartels, bid-rigging and violations under the FCPA, etc.

- Statutory laws and regulations on class certification in U.S. class action lawsuits and cutting-edge economic analysis (Lawrence Wu, NERA)

In U.S. courts, big changes have started to emerge in the decisions on class certification (the process by which a court determines that a lawsuit is one in which a portion of the victims may represent all the victims), which have not changed a great deal in the past. The standards involved in class certification have changed significantly, as have ideas on the problems surrounding class certification and the types of evidence that should be submitted. This lecture focused on antitrust cases and used recent case law that set the precedent for ideas on class certification to explain the background to the need for stricter economic analysis than previously; examples of economic analysis related to class certification; and the benefits of more suitable economic analysis.

- Claims for damages for product liability and mislabeling (Naoya Kaneko, NERA)

To date, many companies have been pursued for product liability in cases such as the health hazards of asbestos; the tea-drop soap affair; the incidences of vitiligo caused by Kanebo's skin whitening cosmetics; the problems with Takata airbags going off abnormally, and other similar issues. There can also be the issue of acting to obtain unfair advantage by mis-labeling a product, even if there are no defects in the product itself; examples include falsifying the origin, type, and expiration date of food products, or exaggerating the effectiveness of supplements. Issues of product liability and mislabeling can present serious problems if discovered - undermining consumer confidence and even jeopardizing the very survival of a company. This lecture explained the problems in establishing evidence of the facts in this kind of product-related scandal, and explained the approach to calculating the amount of damages.