Kaname Capital Demands Independent Third-Party Committee Investigation into Fukuda Denshi Chairman’s Self-Dealing

BOSTON--(BUSINESS WIRE)--Kaname Capital, L.P. (“Kaname”), a shareholder of Fukuda Denshi Co., Ltd. (Securities Code: 6960, “Fukuda Denshi”) since January 2019, has long regarded the self-dealing by Representative Director and Chairman Kotaro Fukuda (“Chairman Fukuda”) as a material issue, and has sought to address it over the past several years through shareholder proposals, derivative litigation, and other measures.

On May 14, 2026, Fukuda Denshi published a disclosure titled “Notice Regarding Inappropriate Use of Expenses by the Representative Director and Chairman and Measures to Prevent Recurrence” (the “Disclosure”), announcing that four categories of misconduct by Chairman Fukuda had come to light: (i) private use of the company headquarters’ underground parking garage, (ii) private misappropriation of company expenses, (iii) private use of sports event tickets, and (iv) private use of company drivers (total ¥154,497,155), together with a repayment agreement, preventive measures, and the voluntary return of compensation by relevant executives.

The Disclosure substantially confirms the facts identified in the investigation report (“Our Report”) that Kaname submitted in April 2026 to Fukuda Denshi’s Board of Statutory Auditors through Fukuda Denshi’s accounting auditor, Yūgen Sekinin Azusa Audit Corporation. We commend the Board of Statutory Auditors for admitting and disclosing the Chairman’s misconduct — but we categorically reject the framing that he has been held accountable, or that stakeholders have been made whole.

The evidence indicates that Chairman Fukuda and the cadre of enablers around him have collectively forgotten Fukuda Denshi’s corporate purpose of serving the medical community and treat the governance norms of a publicly listed company with hostile disdain.

Kaname has sent a public letter dated today to Fukuda Denshi’s Board of Directors and Board of Statutory Auditors, demanding the five actions set out in Section 3 below and the establishment of an independent third-party committee in accordance with the Japan Federation of Bar Associations’ “Guidelines on Third-Party Committees in Corporate Misconduct Cases” (the “JFBA Guidelines”). Given that a substantial portion of Fukuda Denshi’s revenues derives from national health insurance and public medical systems funded by Japanese citizens, this matter is also one of accountability to healthcare users, healthcare professionals, and the public at large; Kaname accordingly publishes the information in its possession to all stakeholders. The informant has consented to the disclosure of this press release.

1. Overview of Our Report

After receiving information from insiders at Fukuda Denshi regarding Chairman Fukuda’s extensive private use of company assets, Kaname commissioned an external attorney to conduct an investigation and compiled Our Report. The Disclosure confirms that the facts identified in Our Report were substantially accurate.

The principal facts identified in Our Report are as follows (Our Report, with certain personal names and other information redacted, is published as an attachment hereto):

(1) Privatization of the Headquarters Underground Parking Garage. Chairman Fukuda continuously parked 30 to 40 sports cars and classic cars, including collectable Ferraris, Porsches and other exotic cars in the underground parking garage of Fukuda Denshi’s headquarters in Hongo, Bunkyo, Tokyo. Access to the underground parking garage is restricted by security; persons other than Chairman Fukuda and certain employees are unable to enter, making it highly probable that the garage was explicitly designed to store Chairman Fukuda’s personal vehicles.

(2) Misappropriation of Private Dining Expenses. Chairman Fukuda held a private dinner at the French restaurant Apicius in Yurakucho, Tokyo. A single 2011 Romanée-Conti consumed that evening cost approximately ¥3.8 million on its own — more than the list price of a standard Fukuda Denshi 12-lead electrocardiograph used in clinics across Japan, and approximately five months’ wages for the average Fukuda Denshi employee. The total bill exceeded ¥4 million and was processed as a company expense by falsely reporting the names of attendees. Fraudulent expense claims for dinners exceeding ¥1 million occurred several times a year; claims exceeding ¥400,000 occurred dozens of times each month; reimbursements with accurate attendee names occurred only approximately twice per month.

(3) Private Distribution of Tokyo Dome VIP Seats. Season tickets for VIP viewing seats at the Yomiuri Giants — contracted by Fukuda Denshi — were predominantly sent to Chairman Fukuda’s personal acquaintances with no business connection, and the names recorded in internal expense claims differed from the actual recipients.

(4) Private Use of Company Drivers / Privatization of Headquarters 8th Floor Facilities. Company-dispatched drivers were used on a continuous basis for moving Chairman Fukuda’s personal vehicles, chauffeuring him on private shopping trips, and delivering home appliances to his residence, among other purposes. At Chairman Fukuda’s request, a sushi counter and a bar counter were installed on the 8th floor of the headquarters building, which was used to store furusato nozei (hometown tax) return gifts of meat and sake purchased for personal use, and to host social gatherings to which Chairman Fukuda privately invited friends and acquaintances.

2. Failures of the Board of Statutory Auditors

The Disclosure contains serious deficiencies in all four dimensions that matter: the amounts recognized, the scope of facts and period investigated, the analysis of root cause, and the independence of the investigating body.

(1) Understatement of Recognized Amounts. Fukuda Denshi recognized the private use of the headquarters underground parking garage as involving “up to 28 vehicles, 58 months, and ¥75,471,827” — but overlooked the fact that the entire underground parking garage was used exclusively by Chairman Fukuda. Based on the registered floor area of the basement (1,756 m² / 531 tsubo) and the average large-building rental rate in Tokyo’s 23 wards of ¥28,409 per tsubo per month, the benefit conferred since March 2022 is approximately ¥720 million — Fukuda Denshi’s recognized amount captures only about one-tenth of that figure. With respect to entertainment expenses, Fukuda Denshi recognized ¥23,225,873 over the past ten years (annual average of approximately ¥2.32 million), but Our Report establishes that over ¥4 million was misappropriated in a single dinner. Sports tickets follow the same pattern: the annual contract fee for Tokyo Dome VIP viewing seats is approximately ¥7.8 million for a 4-person suite and ¥15.6 million for an 8-person suite, so the recognized amount of ¥38,816,368 corresponds to only three to five seasons of contract fees, even though the VIP season ticket contract between Fukuda Denshi and Yomiuri Shimbun Tokyo Head Office Co., Ltd. has been in place for substantially longer. The recognized amounts are plainly incompatible with the objective evidence.

(2) Convenient Framing of Scope and Period. Fukuda Denshi’s investigation identified no new misconduct beyond the scope set out in Our Report. However, Our Report was, by design, a preliminary investigation based on a single informant’s testimony and the documents that informant happened to retain. To treat it as the outer boundary of Chairman Fukuda’s misuse of company assets is to use one whistleblower’s recollection to define the universe of harm. Furthermore, Fukuda Denshi has recognized Chairman Fukuda’s misconduct only as occurring “for at least the past ten years” — even though he has held the position of Representative Director for more than 40 years since August 1985. The investigation thus covers approximately one-quarter of his tenure. The ten-year cut-off has no factual basis — it is an arbitrary line, and a convenient one.

(3) Absence of Investigation into the Root Cause. The Disclosure describes the conduct as “used for private purposes” or “where the business-related nature is unclear or questionable.” That language buries what occurred. The Disclosure does not mention the active concealment that defines this conduct: the false reporting of dinner attendees on monthly expense reimbursement forms, month after month, for at least ten years. This is not “inappropriate use of funds,” but a deliberate and systematic falsification of expense documentation, the active concealment of potentially unlawful transactions, and a sustained breach of fiduciary duty by the Representative Director. There are no “honest mistakes” here, just longstanding cynical privatization of public assets.

(4) Lack of Independence of the Investigating Body. Misconduct by a sitting Representative Director requires investigation by a body independent of him. Kaname indicated this in Our Report. An independent third-party committee is necessary for three reasons: (i) several outside statutory auditors and outside directors have long-standing personal relationships with Chairman Fukuda; (ii) the compliance department that oversees the internal reporting hotline reports up to Chairman Fukuda himself; and (iii) since 2010, the JFBA Guidelines have been the established Japanese best-practice standard for cases of this kind. Despite that, Fukuda Denshi conducted only a Board of Statutory Auditors investigation. Two of the three statutory auditors are former bankers from primary business-partner banks; the third is reportedly a long-standing friend of Chairman Fukuda. The body that investigated the Chairman is, on its face, not independent of him. The Disclosure does not name the external specialists who purportedly assisted the Board, identify who appointed them, state who bore their cost, describe their scope of work, list the evidence to which they had access, or specify the period they covered. None of these omissions is incidental. Kaname’s legal counsel requested a meeting with the statutory auditors in April 2026, following submission of Our Report; that meeting did not take place. No interview with any informant was conducted before the Disclosure was issued.

3. The Five Actions Kaname Demands

Kaname has formally demanded the following five actions from Fukuda Denshi’s Board of Directors and Board of Statutory Auditors in a public letter (attached) dated today:

(1) Hold a press conference at which the Board of Statutory Auditors’ findings, the recognized facts, and the basis for its conclusions are explained on the record and subjected to questioning. As a medical device manufacturer that derives a substantial portion of its revenue from the national health insurance system and the public medical infrastructure funded by Japanese citizens, this company owes accountability not only to its shareholders but to the patients, healthcare professionals, and citizens whose contributions underwrite its business.

(2) Establish a third-party committee constituted under the JFBA Guidelines and conduct a comprehensive reinvestigation covering the full 40-year period of Chairman Fukuda’s tenure as Representative Director (from August 1985) — not the procedurally convenient ten-year window the Company has chosen. Committee member appointments must be made through a process wholly independent of Chairman Fukuda and the executive departments under his supervision.

(3) Correct all past securities reports — including director-compensation and related-party-transaction disclosures — and amend the corresponding tax filings, consistent with the reinvestigation’s findings.

(4) Provide a candid and substantive account in the current fiscal year’s internal control report (内部統制報告書) of how the internal control, audit, and compliance systems of Fukuda Denshi permitted Chairman Fukuda’s conduct to continue unchallenged for at least ten years. Without this, the recurrence-prevention measures announced in the Disclosure are cosmetic.

(5) Reconsider the management responsibility of Chairman Fukuda and of President Daijiro Shirai, who has been in a position to know what was occurring for many years and who looked the other way. The disciplinary actions announced in the Disclosure — voluntary return of officer compensation — are not commensurate with the duration, scale, and structural character of the conduct at issue. They should be reconsidered in light of the reinvestigation’s findings.

The deadline for a response to the public letter has been set for Thursday, May 21, 2026. Note that Fukuda Denshi has scheduled an earnings call for Friday, May 22, 2026 at 4:00 p.m. Should a satisfactory response not be provided by this deadline, Kaname encourages members of the press and other interested parties to consider attending the earnings call and raise questions regarding this matter.

4. Continuity with the Self-Dealing at Issue in the Derivative Lawsuit

On July 30, 2024, Kaname filed a derivative lawsuit naming Chairman Fukuda as defendant, based on the facts relating to his self-dealing with company assets, which remains pending. The private misappropriation of company expenses that has come to light in the Disclosure is merely one facet of a long-standing structural pattern of corporate self-dealing. The principal claims in the lawsuit are as follows:

(1) Arbitrary Payment of Excessive Compensation. Chairman Fukuda’s compensation, which was ¥136 million in the fiscal year ended March 2015, increased sharply to ¥434 million (approximately 3.2 times) by the fiscal year ended March 2023. During the same period, average employee salaries at Fukuda Denshi (non-consolidated) remained essentially flat. Fukuda Denshi has no objective criteria for calculating individual director compensation, and decision-making authority has been left to Chairman Fukuda himself, raising doubts as to whether the procedures required by the Companies Act have been satisfied.

(2) Long-Term Profit Transfer through Atomic Sangyo. Since around 1964, Fukuda Denshi has maintained a continuous business relationship with Atomic Sangyo Co., Ltd., a company owned by the founding family, for the supply of recording paper for electrocardiographs and other products. Despite being lightly staffed and modestly equipped, Atomic Sangyo has continued to record annual operating profits of approximately ¥500 million (operating profit margin of approximately 30%, compared with approximately 2% at a comparable peer company). In May 2015, Fukuda Denshi made Atomic Sangyo a wholly owned subsidiary through a share exchange, delivering to the founding family Fukuda Denshi shares then valued at approximately ¥26.5 billion.

In the litigation, Fukuda Denshi has refused to produce documents requested by the court and has provided almost no explanation to date regarding the process and basis for determining Chairman Fukuda’s individual compensation or the details of its transactions with Atomic Sangyo. This refusal further demonstrates Fukuda Denshi’s disregard for the accountability expected of a listed company.

5. Conclusion — Fukuda Denshi Must Fulfill Its Public Responsibilities and Accountability as a Medical Device Manufacturer

Fukuda Denshi is a medical device manufacturer that has long held the top domestic market share in electrocardiographs, and a substantial portion of its revenues is funded by the national health insurance and public medical systems supported by Japanese citizens’ contributions. The costs of parking for the Ferraris and classic cars that Chairman Fukuda has privately appropriated, the expenses for luxury dinners accompanied by Romanée-Conti, the annual contract fees for Tokyo Dome VIP seats — the source of these funds should properly have been allocated to improving services at the medical frontline, or to improving the compensation of the Fukuda Denshi employees who support healthcare in the field.

A medical device manufacturer exists, first and foremost, to serve the medical professionals and patients who depend on it. For the better part of four decades, Chairman Fukuda has run Fukuda Denshi as if it existed to serve him. The Disclosure does not refute our longstanding concerns or Our Report — it confirms both, in writing, on just two pages. What Kaname now demands of Fukuda Denshi’s Board of Directors and Board of Statutory Auditors is the complete dismantling of the structure that made it possible for so much damage to be done by such a small cadre of enablers, all under Chairman Fukuda’s orchestration.

Chairman Fukuda has wielded unchallenged authority at Fukuda Denshi for over forty years as the second-generation head of the founding family. That structural reality makes meaningful self-correction from within the company unlikely. Since Kaname's shareholder proposals in 2023, we have maintained a public record of constructive criticism — and throughout that period, we have received information from multiple stakeholders who share our concerns about the direction of the company. This investigation would not have been possible without their courage.

Kaname strongly urges all stakeholders who share these concerns — shareholders, employees, business partners, healthcare professionals, and the citizens who support the public medical system — to raise their voices. For those who find it difficult to speak out directly, Kaname is prepared to act as your voice. That is precisely what our position as a shareholder is for. Information may be shared with Kaname in confidence at [e-mail].

[Attachments]
(i) Public Letter dated May 18, 2026 (prepared in both Japanese and English; in the event of any inconsistency between the two language versions, the Japanese version shall prevail)
[English] https://9b5cc9f0-1871-48d4-9379-a0f7002dcedd.usrfiles.com/ugd/9b5cc9_d78961abaff94aff87aae6d2d4f9c48e.pdf
[Japanese] https://9b5cc9f0-1871-48d4-9379-a0f7002dcedd.usrfiles.com/ugd/9b5cc9_3475f89e0e2d4bc1b009532f07e9ef5d.pdf

(ii) Investigation Report (Initial Investigation) dated April 7, 2026 (with certain personal names and other information redacted)
[Japanese] https://9b5cc9f0-1871-48d4-9379-a0f7002dcedd.usrfiles.com/ugd/9b5cc9_e4ef46da215647618113640320942440.pdf

(iii) Complaint dated July 30, 2024
[Japanese] https://9b5cc9f0-1871-48d4-9379-a0f7002dcedd.usrfiles.com/ugd/9b5cc9_ae1c0a8feba24d2191c32604a4fd9e36.pdf