Olympus sues executives over cover-up

Former Olympus CEO Michael Woodford blew the whistle on a $1.7bn accounting fraud at the company [Reuters]

Scandal-hit Olympus is suing 19 current and former executives, including its ex-president, for a combined $215m in damages relating to a massive investment cover-up.

The Japanese electronics giant said it was demanding 3.61bn yen ($47m) from former president Tsuyoshi Kikukawa, who allegedly played a major role in the scandal that rocked global confidence in Japanese corporate governance.

The lawsuits, filed on Sunday at the Tokyo District Court, also demand 3.01bn yen ($39m) from former auditor Hideo Yamada and 2.81bn yen ($36.5m) from former vice president Hisashi Mori.

The three men had been named earlier by a special investigation panel set up by the company as central figures among a small group of top executives that hid at least 134.9bn yen ($1.75bn) in losses from bad investments in the 1990s.

In total, the company is seeking 16.54bn yen ($215m) from the individuals named by a separate committee of three company-appointed lawyers that was tasked with examining the board’s responsibility for the scandal.

Investigation

Olympus’ board of auditors decided to sue the men based on the committee’s 200-page report.

That followed an earlier report by the six-member investigation panel of former judges and outside experts, also commissioned by the company, that revealed details of the scandal in December and condemned Olympus’ top management as “rotten”.

Olympus has admitted that it had used over-priced acquisitions and consultant fees to hide the losses.

Among them was the $2bn purchase of British medical-instruments company Gyrus in 2008, in which Olympus paid $687m to a little-known financial adviser based in the Cayman Islands.

British former chief executive Michael Woodford, who blew the whistle on the scandal, is not among those being sued.

Six current board members, including President Shuichi Takayama, who has been asked to pay 500m yen, have been named in the case, leaving only five other board members apparently free of blame.

Olympus said the current board members named in the lawsuits would resign after the next extraordinary shareholders’ meeting, scheduled for March or April.

“The current board members who were judged to have responsibility by the panel and were sued shall resign in ways that will not interfere with the operation of the company, once the extraordinary shareholders’ meeting is finished,” the company said.

Seeking damages

The scandal came to light after Woodford, the company’s first non-Japanese president, went public to the international media when he was sacked by the company in October.

Japanese, British and US authorities have launched investigations into Olympus, with Tokyo prosecutors, police and regulators raiding its headquarters in Tokyo last month and questioning its former executives in the alleged fraud.

However, after months of campaigning to overhaul the Olympus board, Woodford last week gave up his efforts to return to lead the company, blaming a lack of support from major Japanese institutional shareholders.

He vowed to sue his former employer over his firing, saying he would be seeking damages.

Olympus under Kikukawa denied Woodford’s allegations only to later admit its wrongdoing.

The company avoided having its shares automatically pulled from the Tokyo Stock Exchange when it filed its delayed earnings report on a December 14 deadline, revealing a 32.3bn yen ($416m) loss in the first half of the year.

Shares in Olympus skyrocketed Tuesday, after a three-day weekend in Japan, following the company’s latest announcement and weekend media reports that the Tokyo market would allow the company to stay listed.