Olympus Chiefs in trouble with the law

Seven men including the former President Tsuyoshi Kikukawa, former executive vice president Hisashi Mori and former auditor Hideo Yamada of Olympus Corp and their former bankers Akio Nakagawa and Nobumasa Yokoo and two others have been arrested in Japan in connection with a 1.7 billion dollar fraud that was perpetrated in the late 80’s to hide some risky investments made during Japan’s bubble economy.

In October the then chief executive Michael Woodford, a Briton and one of the rare foreign heads of a Japanese firm, questioned some dubious deals, this resulted in his being sacked by the Olympus board. It has since been found that these deals had been used to conceal the losses through complex takeover deals at the endoscope and camera maker. Mr. Woodford told reporters at a news conference that very large sums of money were involved and there is still a long way to go before a complete understanding of the magnitude of the fraud is uncovered, including the extent of the banks involvement.

The present management is to step down at an April 20th shareholder meeting and investors are wondering what the next step is for this famous company. The new President is expected to be one of the three board members (Masataka Suzuki, Kazuhiro Watanabe and Shinichi Nishigaki) who have been exonerated by the panel. Though Olympus has filed corrected financial statements for the past five years showing a $1.1billion loss, and has forecast a $410 million full year loss due to its ailing camera division, its president said it would not need outside funds because of its successful endoscope business. Also it is expected that these arrests should not affect possible tie-ups with Terumo, Sony, Fujifilm and others, again because of its endoscope business.

Olympus’ spokesperson said that the company was co-operating fully with investigators. Also Olympus is suing 19 executives including Kikukawa, Mori and Yamada. The company is under investigation in Japan, Britain and the US. Shares for Olympus have halved in value since the scandal was brought to light.

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