Kobe Steel, Ltd.
- Company Name
- Kobe Steel, Ltd.
- Stock Symbol
- Class Period
- May 29, 2013 to October 12, 2017
- Motion Deadline
- February 24, 2018
- Southern District of New York
The complaint charges Kobe Steel and certain of its officers and/or directors with violations of the Securities Exchange Act of 1934. Kobe Steel is one of Japan’s largest steel manufacturers and a major supplier of aluminum and copper products.
The complaint alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding Kobe Steel’s business and operations. Specifically, contrary to defendants’ repeated representations about the quality of the Company’s products and the integrity of its operations, including that Kobe Steel offered “excellent products and services” with “special attention to product safety” due to its “organizational culture that is highly sensitive to compliance issues,” the Company had been intentionally falsifying data on many of its aluminum, copper, iron and steel products and knowingly sold products that failed quality control tests. As a result of defendants’ false statements and/or omissions, the price of Kobe Steel’s American Depositary Receipts (“ADRs”) was artificially inflated to more than $9.90 per share during the Class Period.
Beginning on October 8, 2017, the Company began to disclose its improper conduct, stating in a press release that it had discovered that its aluminum and copper business “did not comply with the product specifications which were agreed between the Company and its customers,” causing the price of Kobe Steel ADRs to fall 10%. On October 10, 2017, media and analyst reports disclosed additional information regarding Kobe Steel’s misconduct, including that it “had fabricated data on components used in cars, aircraft and space rockets.” On this news the price of Kobe Steel ADRs fell another 24% to close at $4 per share.
Then, on October 12, 2017, after the markets closed, Bloomberg reported that the Company’s “fake data scandal expanded to its core business after the company admitted ‘inappropriate actions’ related to steel wire produced overseas . . . used in auto engines and to strengthen tires,” stating that the “deepening scandal ‘suggests that this is a company culture, not just the actions of a few rogue employees.’” The next day, Kobe Steel admitted that its employees had been falsifying inspection certificates on its core products and that it had not been in compliance with customer standards. As a result, the price of Kobe Steel ADRs declined $0.40 per share, or approximately 10%, to close at $3.55 per share.