Prosecutors raid Olympus over accounting scandal

Reuters, TOKYO

Thu, Dec 22, 2011 - Page 10

Japanese prosecutors raided the offices of Olympus Corp and the home of a former executive yesterday in a probe into a US$1.7 billion accounting scandal that has threatened the survival of the once-proud camera and medical equipment maker.

Tokyo prosecutors, police and financial regulators have joined forces in a rare joint investigation of the 92-year-old company, which has admitted to hiding huge investment losses via questionable merger and acquisition deals and other accounting tricks stretching back over two decades.

Public broadcaster NHK showed dozens of black-suited investigators marching double-file into an office building that houses three Olympus subsidiaries acquired under one of the loss-making schemes, in what has become one of Japan’s biggest corporate scandals.

Investigations moved into high gear after a panel of experts appointed by Olympus to probe the scandal said early this month that two senior former executives masterminded the scheme with the help of investment bankers. It also found that three former presidents, including Tsuyoshi Kikukawa, who resigned in October over the scandal, had known about the cover-up.

Japanese TV also showed investigators raiding Kikukawa’s residence, as well as Olympus headquarters in a high-rise office district on the western edge of central Tokyo.

Olympus acknowledged the raids in a statement.

“We will continue to cooperate fully with investigative authorities in order to bring the facts to light,” the company said.

“We would again like to apologize deeply for causing great trouble and worry for our shareholders, investors and those we do business with,” Olympus said.

Olympus last week filed five years of corrected accounts, plus overdue first-half results, meeting a Tokyo Stock Exchange deadline to avoid a humiliating delisting, but they revealing a much-depleted balance sheet as the company tries to put the scandal behind it.

The company could still face delisting if the exchange deems that the company’s accounting deceit is sufficiently grave.

Former chief executive Michael Woodford, who blew the whistle on the scandal after being fired in October, is campaigning to get his job back, but he faces long odds in his battle with current management, which is expected to get backing from its bankers for a plan to bring in outside investors to bolster the company’s finances.

“I’m tremendously sad that it’s come to this, especially when it could have been avoided, depending on the actions of upper management,” Olympus employee Masaharu Hamada said outside the company’s headquarters as it was being raided.

Hamada has taken legal action against the company in a case unrelated to the accounting scandal, charging that he was subjected to harassment by management after reporting a compliance breach by his supervisor.

A lower Tokyo court has ruled in his favor and the case is now on appeal.