Notice of Misconduct in the Clean Robot Division
It has turned out that accounting irregularities and improper claims occurred for certain projects
commissioned and subsidized by the Ministry of Economy, Trade and Industry (“METI”), the New
Energy and Industrial Technology Development Organization (“NEDO”) and the Japan Science andTechnology Agency (“JST”) in the Clean Robot Division of the Eco Technologies Company of Fuji
Heavy Industries Ltd.(FHI). Having discovered this, FHI filed a criminal complaint today against aformer general manager of the Clean Robot Division (dismissed on disciplinary grounds as of February17, 2012) with Tochigi Police.
FHI expresses its most sincere apology to its shareholders and clients as well as all other related parties
for causing great anxiety and annoyance. FHI takes this matter seriously and is determined to further
strengthen its compliance system in order to prevent recurrence of similar incidents.
1. Discovery and investigation of misconduct
On August 10, 2011, inappropriate accounting treatments in the Clean Robot Division were pointed out
during a tax inspection by Tokyo Regional Taxation Bureau. Internal investigations conducted thereafterraised suspicion that in addition to the inappropriate accounting treatments, improper claims occurred forthe projects commissioned and subsidized by METI, NEDO and JST. On October 5, 2011, an internal
investigation committee including lawyers and accountants was formed and started further investigations
by clarifying financial flows including those to and from suppliers and questioning persons involved. The
committee’s investigations have revealed that improper claims occurred and at the same time, accounting
irregularities such as window dressing of performance of the Clean Robot Division occurred, at thedirection of the former general manager. FHI has reported the facts to METI and other relevant
authorities.
2. Facts revealed by internal investigations(1) FHI has incurred damages of approximately 106 million yen by the accounting irregularities suchas window dressing of performance of the Clean Robot Division and misappropriation of company
funds for personal or other use.
(2) Approximately 194 million yen was obtained through the improper claims for the commissioned
projects and the subsidized projects.
3. The accounting irregularities(1) Outline of the accounting irregularities(i) Window dressing of performance of the Clean Robot DivisionDuring the period from the fiscal year 2005 to 2010, in order to falsify the division’sperformance, the former general manager placed fictitious orders of approximately 266
million yen with several suppliers and made the suppliers purchase products of the Clean
Robot Division for approximately 246 million yen with the money paid under such fictitiousorders and caused damages of approximately 20 million yen to the company by such circulartransactions.
(ii) Pooling of money at suppliers and misappropriation of such money
During the period from the fiscal year 2004 to 2011, the former general manager placed
fictitious orders with certain suppliers, pooled approximately 72 million yen at the suppliers,
made the suppliers use the money to purchase items for use in the Clean Robot Division andmisappropriated the money for his personal use.
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(iii) Transferring of money to companies the former general manager was involved in for theirincorporation
In the fiscal year 2009 and 2010, the former general manager placed fictitious and paddedorders with companies the former general manager was involved in for their incorporationand improperly transferred approximately 14 million yen to the companies.
(2) Action taken against the former general manager
FHI filed a criminal complaint today against the former general manger for fraud with Tochigi
Police.
4. The improper claims(1) Outline of the improper claims for the commissioned projects and the subsidized projects
Out of approximately 1,056 million yen received for eight projects commissioned or subsidized byMETI, NEDO and JST, including the Development Project for Intelligent Technologies ofNext-generation Robots and the Project of Support for Creating Service Robot Market,
approximately 194 million yen was received through improper claims made by the former generalmanager. The improper claims were made by padding expense claims for the commissioned
projects and the subsidized projects based on fictitious orders to and padded bills from suppliers
for parts manufacturing work and drawing, etc. and to cover internal labor cost, etc. The funds
obtained through these improper claims were used to create false accounting entries. The amountof funds received through the improper claims was revealed by the internal investigations and maychange upon investigations by the relevant authorities.
(2) Return of funds obtained through improper claims
FHI will return the funds obtained through the improper claims for the commissioned projects andthe subsidized projects, based on findings of investigations by the relevant authorities.
5. Motives and causes for misconduct(1) Motives for misconduct
At first, the former general manager manipulated the division’s accounting to generate funds to use
without going through the proper procedures of the company and to inflate the division’s
accounting figures in order to avoid a deficit at year end. Later, the former general manager started
to transfer funds to the companies he was involved in for their incorporation for the purpose ofconducting the Clean Robot business privately at the companies.
(2) Causes for misconduct
Because the market for the service robots is extremely small at this point in time and the former
general manager had a certain reputation in the industry, he was in a situation that he could conduct
the business of the division in his discretion using his connections and influence. In addition,
because the Clean Robot Division is a new business unit, is small in size and has little working
relations with other units of the company, the division was in an environment where dailyoperations were conducted without consensus with other sections. The former general manager
utilized such unusual circumstances and environment described above and committed misconduct
by using shrewd tricks, such as falsifying vouchers in conspiracy with the suppliers.
6. Preventive measures(1) Reorganization of business control system
To separate line and staff authorities for any scale of business, and rotate personnel who stay in thesame post for a long term.

2(2) Strengthening of preventive function for accounting irregularities
To provide internal education for persons handling payment and approving payment, andstrengthen the management of suppliers by monitoring implementation of screening standards andprocedures for suppliers.
(3) Strengthening of internal audit system
To review the system of the Internal Audit Department and strengthen the function to detectmisconduct in any department or line of business.
(4) Reconfirmation of compliance
To provide compliance education for all the officers and employees again and ensure that all ofthem are informed of the Compliance Hotline.
7. Disciplinary action against persons involved
FHI dismissed the former general manager of the Clean Robot Division on disciplinary grounds as ofFebruary 17, 2012. FHI will also strictly treat other persons involved in the matter.
8. Effect on the company’s financial condition
FHI estimates that this matter has little effect on the company’s financial condition.
9. Business of the Clean Robot Division
FHI will review the business of the Clean Robot Division with a view to downsizing and withdrawing
from the existing business in the future. The division will continue to conduct its business as a part of thecompany for the time being, but will not accept a new order. Upon completion of delivery to thecustomers of the products already ordered, the division will focus on maintenance and after-sales servicesof the products.
10. Profile of the Clean Robot Division(1) History
1989 Started full-scale research on automation of cleaning equipment at Subaru Research Center
Co., Ltd.(at the time)
1992 Delivered the first model of cleaning robot
1999 Put an elevator boarding system for floor-cleaning robot into practical use
2005 Displayed an outdoor cleaning robot and an outdoor garbage can carrying robot at the 2005
World Exposition, Aichi, Japan
2007 Put a robot system capable of cleaning outdoor common area in apartments into practicaluse
2009 Developed a farming robot and a robot system capable of cleaning office area
(2) Employees
Regular employees: 7
Temporary employee: 1
Total number of employees: 8(3) Financial performance
Sales for the fiscal year 2010: 217 million yen

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