After turnaround, Olympus admits it hid losses

After turnaround, Olympus admits it hid losses

The revelations by the company appear to vindicate ex-CEO Michael Woodford, who has staged a campaign since being sacked on October 14 to force the firm to come clean on nearly $1.5 billion in questionable payments.

Olympus President Shuichi Takayama blamed Tsuyoshi Kikukawa, who quit as president and chairman on October 26, Vice-President Hisashi Mori and internal auditor Hideo Yamada for the cover-up, saying he would consider criminal complaints against them.

Olympus said it had found that funds related to its $2.2 billion purchase of British medical equipment maker Gyrus in 2008, which involved a huge advisory fee of $687 million, as well as payment of $773 million for three tiny domestic firms, were used to hide losses on the securities investments.

The disclosure leaves Olympus, its directors and its accountants open to possible criminal charges for suspected accounting fraud and shareholder suits, lawyers and analysts said, raising questions about the future of the firm, founded in 1919 as a microscope maker.

Olympus said it discovered the cover-up while working with an independent panel set up last week to investigate the deals. Kikukawa and Mori confessed to their roles on Monday night, Takayama said.

Mori was sacked earlier in the day while the internal auditor offered to resign. Olympus said it would decide whether others were responsible after further investigation.
The independent panel’s head, retired Supreme Court justice Tatsuo Kainaka, said his team may recommend criminal charges in its report, to be completed early next month.

The Olympus affair is the biggest corporate scandal to hit Japan since a series of scandals at brokerages in the 1990s including one that led to the demise in 1997 of Yamaichi Securities, then the country's fourth largest brokerage.

The firm said it had funneled money related to the acquisitions through various funds and other measures to defer posting the unspecified losses, similar to practices seen after Japan's bubble economy of soaring asset prices burst in 1990.

While Olympus did not offer concrete details, Takayama said he believed the company may have initiated the loss-postponing scheme when its earnings had taken a drastic turn for the worse, possibly during a period of yen strength.