Olympus Ex-President, Others Arrested: Media


Three former executives of Japan's disgraced Olympus were arrested on Thursday over their role in a $1.7 billion accounting fraud at the maker of medical equipment and cameras, Japanese media reported.

Olympus chairman Tsuyoshi Kikukawa announces the company had stripped their first ever non-Japanese president Michael Woodford of his title just six months after appointing him, at a press conference at the Tokyo Stock Exchange on October 14, 2011. Citing management differences, the camera and precision devices maker said it had demoted Briton Michael Woodford over "a big gap" between him and other board directors on company management and strategy.
Yoshikazu Tsuno | AFP | Getty Images

Tokyo prosecutors arrested ex-President Tsuyoshi Kikukawa, former Executive Vice President Hisashi Mori and former auditor Hideo Yamada, Tokyo Broadcasting System Television and other media said.

Prosecutors also arrested three former employees of a major brokerage who advised Olympus on covering up its losses, media reported, without naming the people or the brokerage.

The move comes as investors turn their attention to who will take the helm at the once-proud company when its management steps down at an April 20 shareholders meeting over one of Japan's biggest corporate scandals, and whether Olympus will seek a capital tie-up to fix its balance sheet.

Kikukawa, Mori and Yamada have been identified by an Olympus-commissioned investigative panel as the main culprits in the fraud.

They were being investigated for violations of the Financial Instruments and Exchange Law, the Nikkei said. An Olympus spokesman said the company would cooperate fully with investigative authorities.

Last year, the investigative panel found the trio had played leading roles in a 13-year scheme to hide the losses, and they are among 19 executives Olympus is suing over the scandal.

Kikukawa's condominium house was among 20 sites raided in December by prosecutors. The Nikkei said Kikukawa, who took over as president in 2001, was reportedly aware of the details of the cover-up.

Olympus is banking on the April shareholder meeting to mark a turning point in the scandal, with at least six of its 11-member board, including President Shuichi Takayama, set to resign.

The company is likely to pick Takayama's successor from among the three board members the panel said were not responsible for the cover-up — Masataka Suzuki, Kazuhiro Watanabe and Shinichi Nishigaki, said a source familiar with the matter, who did not want to be identified due to the sensitivity of the issue.

The scandal was exposed last October by then-chief executive Michael Woodford, a rare foreign CEO in Japan, who was sacked by the Olympus board after questioning dubious M&A deals that were later found to have been used to conceal the losses.

The affair also fanned concerns about lax corporate governance in Japan generally.

Olympus in December filed five years' worth of corrected financial statements plus overdue first-half results, revealing a $1.1 billion dent in its balance sheet, triggering talk it would need to merge or forge a business tie-up to raise capital.

On Monday, the firm firm forecast a $410 million full-year loss due largely to its ailing camera operations, but its core endoscope business appeared unscathed by the scandal, and its president said the firm might not need outside capital.

Olympus is also under investigation by law enforcement agencies in Japan, Britain and the United States.

Olympus shares were down 1.3 percent at 1,287 yen on Thursday, while the broader market was down 0.3 percent.