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Kobe Steel Class Action Lawsuit - Kobe Steel ADR Holders

Kobe Steel Class Action Lawsuit – Kobe Steel ADR Holders

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Kobe Steel Class Action Lawsuit on Behalf of Purchasers or Acquirers of Kobe Steel American Depositary Receipts (“ADR”) Between May 29, 2013 and October 12, 2017, Inclusive (“Class Period”)

On December 26, 2017, a securities class action lawsuit was filed in United States District Court, Southern District of New York, on behalf of all persons who purchased or otherwise acquired Kobe Steel’s American Depositary Receipts (“ADRs”) during the Class Period.

The Kobe Steel class action lawsuit was brought against Kobe Steel and certain of its officers and/or directors for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

Kobe Steel, Ltd. (OTCMKTS: KBSTY)

Kobe Steel’s “Corporate Profile” reflects that

Kobe Steel, Ltd. is one of Japan’s leading steelmakers, as well as a major supplier of aluminum and copper products. Other business segments consist of wholesale power supply, machinery, construction machinery, real estate, and electronic materials and other businesses.

The Kobe Steel Group is comprised of numerous consolidated and equity-valued companies in Japan, the Americas, Asia and Europe.

KOBELCO is the corporate logo mark and brand name of the Kobe Steel Group.

Kobe Steel Class Action Lawsuit

According to the Kobe Steel class action lawsuit complaint:

At the beginning of the Class Period, Kobe Steel launched a new business plan ostensibly to make [Kobe Steel] more efficient and profitable for sustained growth. The progressive business strategy purported to “reduce fixed costs, procurement costs, quality error costs, and other costs.” Throughout the Class Period, Kobe Steel maintained that its business plan was “making steady progress” consistent with its “Core Values” of “provid[ing] technologies, products and services that win the trust and confidence of our customers we serve and the society in which we live” and “corporate philosophy” of “provid[ing] reliable and advanced technologies, products and services that satisfy customers.”

In tandem with its business plan, Kobe Steel repeatedly represented the quality of its products and integrity of its operations. Kobe Steel frequently emphasized [Kobe Steel’s] compliance with “the laws, corporate rules and societal norms” and that it fostered a culture of high ethical standards and corporate governance where it conducts its “corporate activity in a fair and sound manner with the highest sense of ethics and professionalism.” Throughout the Class Period, Kobe Steel represented its commitment to a strong corporate code of ethics as it “offer[s] excellent products and services” by “operat[ing] business fairly and honestly” and by “comply[ing] with applicable laws, rules and principles of society.” Kobe Steel represented that it prioritized its products and people by “pay[ing] special attention to product safety.” Notably, [Kobe Steel] represented to have “an organizational culture that is highly sensitive to compliance issues” and “[t]horoughly carry out compliance and contribute to society.” Moreover, Kobe Steel represented that its internal reporting system “prevent[s] risks associated with legal, ethical and other compliance-related issues from materializing and spreading.”

However, unbeknownst to the market, Defendants’ . . . Class Period statements pertaining to the specifications of its products and performance of its operations were materially false and misleading because [Kobe Steel] had falsified data on many of [its] products including its aluminum, copper and steel products; and sold products that failed quality control tests in violation of laws and regulations. [Emphasis added]

Kobe Steel Class Action Lawsuit – Kobe Steel Press Release: “Improper conduct concerning a portion of the aluminum and copper product manufactured by Kobe Steel”

According to the Kobe Steel class action lawsuit complaint:

On Sunday, October 8, 2017, during the day, [Kobe Steel] issued a press release . . . disclos[ing] that certain of Kobe Steel’s products “did not comply with the product specifications” and “[d]ata in inspection certificates had been improperly rewritten etc., and the products were shipped as having met the specifications concerned.” [Emphasis added]

On this news, ADRs1 of Kobe Steel fell $0.62 per ADR or over 10% from its previous closing price to close at $5.30 per ADR on October 9, 2017. [Emphasis added]

Kobe Steel Class Action Lawsuit – Reuters: “Kobe Steel’s data-fabrication stuns Japanese manufacturers”

According to the Kobe Steel class action lawsuit complaint:

On October 10, 2017, before the U.S. market opened, Reuters published an article . . . disclos[ing] that several major manufacturers had confirmed use of the affected Kobe Steel products.

On this news, ADRs of Kobe Steel plummeted throughout the trading day. Kobe Steel ADRs ultimately fell $1.30 per ADR or over 24% from its previous closing price to close at $4.00 per ADR on October 10, 2017. [Emphasis added]

Kobe Steel Class Action Lawsuit – Bloomberg: “Kobe Steel Scandal Expands Into Core Business Overseas”

According to the Kobe Steel class action lawsuit complaint:

After the market closed on October 12, 2017, Bloomberg published an article . . . which reported that [Kobe Steel’s] fake data scandal included its core business of steel to numerous international companies.

Bloomberg’s article also stated:

Kobe’s admission of misconduct in its steel business, which accounts for about a third of revenue, ratchets up the pressure on Japan’s third-biggest steelmaker. The company’s disclosures had up until now dealt with aluminum, copper and iron ore products used in everything from cars to computer hard drives to Japan’s iconic bullet trains, although there haven’t been any reports of products being recalled or safety concerns raised.

The deepening scandal “suggests that this is company culture, not just the actions of a few rogue employees,” Alexander Robert Medd, managing director at Bucephalus Research Partnership Ltd. in Hong Kong, said by email. The question to be resolved is “were they trying to save money or just unable to produce the right spec in the right quantities,” he said.

Kobe’s shares have plunged 42 percent this week, including a 9.1 percent drop on Friday, after it revealed on Sunday that it had fudged data on the strength and durability of metals supplied to as many as 200 customers around the world, including Toyota Motor Corp., General Motors Co. and space rocket-maker Mitsubishi Heavy Industries Ltd.

Kobe Steel Class Action Lawsuit: Kobe Steel Press Release: “Report on improper conduct concerning Kobe Steel and its group of companies.”

According to the Kobe Steel class action lawsuit complaint:

On October 13, 2017, during U.S. market hours, Kobe Steel issued a press release . . . provid[ing] updated information about an investigation into the falsified data and related wrongdoing and listed numerous nonconforming products [Kobe Steel] had identified to date. On the same day, several media outlets reported that the number of impacted customers had more than doubled from the initial estimates of 200 customers. [Emphasis added]

On this news, ADRs of Kobe Steel fell $0.40 per ADR or over 10% from its previous closing price to close at $3.55 per ADR on October 13, 2017. [Emphasis added]

Kobe Steel Class Action Lawsuit – Additional News

According to the Kobe Steel class action lawsuit complaint, “[s]ubsequent news reports and [Kobe Steel’s] own internal investigation revealed that Kobe Steel’s lack of quality controls and data tampering was a result of, among other things, wholly inadequate and ineffective corporate governance and compliance initiatives.”

Kobe Steel’s Update on Safety Verification Status

On December 22, 2017, Kobe Steel issued an “Update on safety verification status concerning improper conduct in the Kobe Steel Group.”

Kobe Steel American Depositary Receipt Holders

If you purchased or otherwise acquired Kobe Steel American Depositary Receipts (“ADRs”) and wish to speak privately with a securities attorney about your potential legal rights, please fill out the form above on the right or e-mail [email protected].

Kehoe Law Firm, P.C.