Making Amends

Only hours after celebrating their company's 112th anniversary in a solemn ceremony at Tokyo's sumo wrestling arena last week, Toshiba Corp. President Sugiichiro Watari and Chairman Shoichi Saba suddenly dashed to their corporate headquarters for an emergency board meeting. Then, at a hastily called news conference, the two executives resigned. That surprise gesture of contrition came less than a day after the Senate voted 92 to 5 to prohibit Toshiba and Kongsberg Vapenfabrikk, Norway's largest defense contractor, from selling any products in the U.S. for two to five years.

The sanction vote was intended to punish Toshiba, whose 50.1%-owned Toshiba Machine subsidiary joined with Kongsberg to sell the Soviet Union sensitive technology that enables submarines to move more quietly underwater and thus escape detection. Under the terms of the Senate ban, which was passed as an amendment to a pending omnibus trade bill, the Federal Government is required to seek financial compensation from Toshiba and Kongsberg for the technology leak. Some Congressmen estimate that it could cost the U.S. up to $30 billion to bolster its defenses in the wake of the caper.

The bill also empowers President Reagan to exempt certain items from the ban, including products essential for defense. Kongsberg hopes such an exemption would allow it to fulfill a $96 million contract to sell Penguin air-to-ship missiles to the Navy. Without that sale, Kongsberg might be forced to file for bankruptcy.

Toshiba will be hard hit by the ban if it becomes law. The Japanese conglomerate last year exported to the U.S. $1.7 billion worth of VCRs, home computers and semiconductors, among other goods. Congressional sanctions might spark a wave of layoffs at the firm's U.S. subsidiaries, which employ 4,500 workers.

After the vote, a State Department spokesman said that Senate penalties "could be counterproductive because they run contrary to the spirit and practice" of export controls. The scandal was calmly discussed at a meeting in Tokyo last week between Defense Secretary Caspar Weinberger and Japanese Prime Minister Yasuhiro Nakasone, in which Japan promised to help the U.S. strengthen its anti-submarine warfare capability.

On Capitol Hill, feelings are still ruffled by the incident. Said Democratic Senator Dale Bumpers of Arkansas: "A lot of people are in prison in this country for doing a lot less than Toshiba did." The House is weighing measures similar to those passed by the Senate. If the President vetoes the trade bill and thus the sanctions, the penalties could still be introduced as separate legislation. In that circumstance, Congress is expected to have enough votes to override a veto.