A Japanese government adviser told the Harvard University endowment fund that its vote at Toshiba Corp’s annual shareholders meeting could be subject to a regulatory probe should it vote against the firm’s management, four sources said.

As a result, the U.S. university abstained from voting, three of the sources said. It later learnt there was no basis for any probe, two of them said.

The alleged comment by Hiromichi Mizuno, special adviser to the Ministry of Economy, Trade and Industry (METI), is at odds with Japan’s push for improved corporate governance and adds attention to a meeting that has drawn shareholder complaints.

The Financial Times previously reported Mizuno told the fund a vote against management would damage Harvard’s reputation. His mention of a potential probe and other details of his dialogue with the university are reported here for the first time.

Mizuno did not respond to Reuters’ requests for comment sent both by registered mail and direct message to his actively used Twitter account.

A METI official said the ministry was not in a position to comment on the matter, and that it never asked Mizuno to contact Toshiba shareholders.

Mizuno is the former chief investment officer of Japan’s $1.4 trillion Government Pension Investment Fund, and a current board member of U.S. electric vehicle maker Tesla Inc. Reuters could not determine his relationship with Toshiba.

A Toshiba spokeswoman said the firm was not in a position to comment. A spokesman for the Harvard Management Company declined to comment, while its chief executive, N.P. “Narv” Narvekar, did not respond to a request for comment. The four sources declined to be identified as the matter was private.

Deterioration
Mizuno approached Harvard weeks before the July 31 meeting after hearing it was frustrated over governance at Toshiba, two of the sources said. Toshiba has been dogged by accounting issues and in January again revised its financial statements.

Harvard’s $41 billion endowment fund owns over 4% of Toshiba and invests in Singapore-based activist hedge fund Effissimo Capital Management, Toshiba’s biggest shareholder with a 9.91% stake, the sources said.

Mizuno’s initial approach was friendly but his dialogue with Narvekar via emails and calls deteriorated on the weekend before the meeting, as deadlines approached for overseas funds to direct local custodians how to vote, two of the sources said.

On one call, Mizuno raised the issue of foreign ownership regulation, the four sources said, referring to a rule stating foreign funds that together own 10% or more of a listed company must declare when they intend to coordinate on voting.

He focused on Harvard’s relationship with Effissimo and the vote for board candidates proposed by the hedge fund, two sources said.

Mizuno voiced the possibility of a regulatory investigation should Harvard vote against the interests of Toshiba management, four sources said. Harvard ultimately abstained, three said.

Reuters could not determine whether Harvard and Effissimo had agreed to coordinate voting. Effissimo declined to comment.

Compromised

Opponents to Toshiba management have complained of perceived governance lapses under Chief Executive Nobuaki Kurumatani, who kept his job with 57% of the vote. That compared with 99% last year in a country where CEOs usually get overwhelming support.

Effissimo’s three candidates were opposed by management and failed to get elected, though one received 44% of the vote.

Effissimo has since called for an extraordinary shareholder meeting to establish a team of legal experts to investigate, saying the voting rights of some shareholders were compromised. 

Reuters