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Toshiba President, Chairman Resign in Soviet Machine Sales Case

July 1, 1987

TOKYO (AP) _ The president and chairman of Toshiba Corp. resigned today after the United States moved to punish the company for selling the Soviet Union secret technology that will help Soviet submarines escape detection.

Toshiba President Sugiichiro Watari and Chairman Shoichi Saba announced their resignations at a news conference hours after the U.S. Senate voted Tuesday night to ban the import of Toshiba products into the United States for two years.

Between 1982 and 1984, Toshiba Machine, a subsidiary of Japan’s second- largest electronics enterprise, illegally sold milling machines capable of manufacturing ultra-quiet submarine propellers to the Soviet Union.

Defense Secretary Caspar Weinberger said in Tokyo on Monday that ″the damage to our mutual (U.S.-Japan) security was of course significant.″

Saba denied any links between Toshiba Corp. and the illegal sales, but said that as executives of the parent company of Toshiba Machine, the two must step down to take responsibility.

″We have a big responsibility as the parent company,″ Saba said. ″We feel responsible for having troubled society.″

He denied the resignations came in reaction to the Senate vote.

Toshiba Corp. had estimated sales of $2.76 billion in the United States in 1986, including $344.8 million worth of semiconductors. Other products include color televisions, video recorders and personal computers.

Saba said Toshiba Corp. would investigate the machinery sales. He said it was setting up its own investigation team that will include people from Toshiba Machine and Price Waterhouse, the U.S. accounting firm that audits Toshiba’s finances.

Watari will be replaced by Joichi Aoi, currently Toshiba’s senior executive vice president, Saba said. He did not say who would succeed him as company chairman, but said he and Watari would stay on as consultants.

Toshiba Machine’s new president, Akira Iwahashi, said today the subsidiary would eliminate ″for an unspecified period″ the divisions whose function was to export to communist countries. The subsidiary’s sales to communist countries totaled $34 million in 1986.

Iwahashi apologized for the trouble caused to the parent and Toshiba group companies ″despite the fact that we have operated independently and the transactions have nothing to do with them.″

Toshiba Machine is 50.08 percent owned by Toshiba Corp., which said earlier it would have both the parent and subsidiary audited to prove that Toshiba Machine is just a subsidiary, not a division of Toshiba Corp.

The sales violated Japanese law and statutes of the Coordinating Committee on Export Control, which regulates exports to communist countries.

A Japanese decree bans exports of 178 high-tech, strategic items to communist countries in line with an agreement with the Paris-based COCOM, which includes Japan and members of the North Atlantic Treaty Organization among its 16 member countries.

Violators of the decree face a maximum penalty of three years in prison and a maximum fine of three times as much as the amount of the sale.

Two Toshiba Machine executives have been arrested in connection with the sales and the Japanese government has prohibited the company from exporting to communist countries for one year.

Toshiba Machine and two other firms also have lost the right to sponsor entry visas for personnel from the Soviet Union and eastern Europe.

Four high-ranking officials from Toshiba Machine, including former president Kazuo Iimura, resigned earlier to take responsibility for the illegal sales.

At a news conference in Tokyo Monday, Weinberger said, ″There’s no question that the ability for the Soviets to run their submarines in a much quieter fashion and therefore make them more difficult to detect has been attained ... and that is a serious loss.

″We (United States and Japan) will simply have to make sure that in working together with our mutual talents and cababilities and energies, we keep a lead over the Soviets in anti-submarine warfare,″ he added.

He said the United States and Japan had agreed to improve their anti- submarine warfare capabilities, but refused to spell out what measures were planned.

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