Olympus and three of its former executives; ex-chairman Tsuyoshi Kikukawa, former vice-president Hisashi Mori and former auditor Hideo Yamada, have been charged in connection with the £1bn accounting scandal. Three outside advisers, Akio Nakagawa, Nobumasa Yokoo and Taku Hada, have also been arrested for their alleged involvement in dubious acquisitions. In a recent statement Olympus said: ‘We take these charges very seriously and will continue to strengthen our corporate governance.’
The board initially denied hiding investment losses through complex takeover deals however they later admitted they had been falsifying securities reports for over twenty years. It proves that the firm has been badly managed for years. The scandal was brought to light by former chief executive Michael Woodford who questioned Olympus accounting practices, particularly the payment of $687m to financial advisers during the acquisition of UK medical equipment company Gyrus. He claimed he was later fired for the accusations. Mr Kikukawa resigned shortly after the scandal came to light in October however he was arrested last month, altogether with Mr Mori, Mr Yamada as well as former bankers and financial advisers for the company.
Also see: Olympus loss-hiding scandal
Olympus has been going through a tough time since the cover-up was revealed. The way it handled the crisis is also questionable as despite suing 19 people involved in the wrongdoing, some of those accused continued to work as board members. The company assures that the rest of the management involved will resign by April. In an attempt to recover from the situation Olympus proposed a new board of directors which will be subject to approval at an emergency shareholders' meeting next month.
However, because of the delay in sorting out the management issue, the scandal has already negatively affected the company. It cost Olympus its shares which plunged more than 50 per cent on the Tokyo Stock Exchange. The firm also made a 33.09bn yen (£269m) loss over the period. The TSE assured that the charges would not affect the company's current listing status although the firm was fined 10m yen by the exchange. It was decided in January that Olympus could keep its listing but would have to be put on a ‘security on alert’ as a company that needs to improve its internal management.
The firm is under investigation by law enforcement agencies in Japan, Britain and the United States. The Securities Exchange and Surveillance Commission (SESC) pressures the Financial Services Agency to fine Olympus more than 100 million yen ($1.2 million) for false accounting. Olympus itself is suing five of its internal directors, including current President Shuichi Takayama, for mismanagement.
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