Sat, Dec 22, 2012 - Page 15 News List

Authorities hold Taiwanese over Olympus fraud


A man passes behind a logo of Japan’s Olympus Corp at the company headquarters in Tokyo on June 19. A former banker was arrested on Thursday and accused of helping “liquidate” hundreds of millions of US dollars in an Olympus accounting scandal.

Photo: Reuters

A former Singapore banker was arrested in Los Angeles on Thursday and accused of helping “liquidate” hundreds of millions of US dollars in an accounting fraud at Olympus Corp, one of the biggest corporate scandals in Japan’s history.

Chan Ming-fon, a Taiwanese, and one-time bank vice president, is the latest former executive and the first from outside of Japan to become ensnared in the US$1.7 billion accounting cover-up at the camera and medical equipment maker.

The company has admitted using improper accounting to conceal massive investment losses under a scheme that began in the 1990s.

Court papers in the US said Chan was paid US$10 million by Olympus, or entities controlled by Olympus, for his role in the fraud. The case against Chan was filed in a federal court in New York.

“The defendant had a direct role in the secret liquidation of hundreds of millions of dollars of Olympus investments. He then waged a six-year campaign to conceal that misdeed by lying, certifying to auditors that the investments still existed years after liquidation,” FBI Assistant Director-in-Charge George Venizelos said.

Olympus declined to comment.

Chan’s arrest comes after three former Olympus executives pleaded guilty in September to charges related to the fraud.

Chan was interviewed by the FBI this week, US authorities said. He was being held in custody ahead of a scheduled appearance in a federal court in Los Angeles yesterday. The former banker at Commerzbank AG and Societe Generale in Singapore is charged with one count of conspiracy to commit wire fraud, which carries a maximum penalty of 20 years.

Commerzbank and Societe Generale could not be reached for comment.

The accounting fraud at 93-year-old Olympus was exposed in October last year by chief executive Michael Woodford, who was fired after he questioned dubious deals that were later found to have been used to hide losses.

The three former executives who pleaded guilty had been identified by an investigative panel, commissioned by Olympus as the main suspects in the fraud seeking to delay the reckoning from risky investments made in the late-1980s bubble economy.

Former chairman Tsuyoshi Kikukawa, former executive vice president Hisashi Mori and former auditor Hideo Yamada said they inflated the company’s net worth in financial statements for five fiscal years to March last year. They are awaiting sentencing.

Revelations of the huge accounting fraud have revived calls for more outside scrutiny of its boardrooms, but have failed to trigger sweeping corporate governance reforms similar to those introduced a decade ago in the wake of US scandals such as at Enron Corp.

Forced to re-issue several years of financial statements, Olympus has been left financially weakened and reported losses of US$581 million in the fiscal year to March 31.

Its shareholder equity to total assets has dipped as low as 2.2 percent, well below the 20 percent level regarded as a minimum for stability.

The liquidity crunch has prompted it to accept US$592.49 million from Sony Corp in return for an 11.46 percent stake and an agreement to set up a joint venture to develop medical equipment.

The two companies yesterday said that plans to establish that company had been delayed as they wait regulatory approval overseas.

Olympus shares in Tokyo dipped 1.4 percent yesterday compared with a 0.8 percent fall in the benchmark Nikkei 225 index.

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