SFO will take Japanese camera giant Olympus to court over ‘false accounts’

Olympus paid $2 billion (£1.3 billion) for Gyrus and ran up the world’s biggest takeover advisory fee
  • @ArmitageJim

The Serious Fraud Office today said it will prosecute Japanese camera and medical scanners giant Olympus over the fraud that saw chief executive Michael Woodford sacked for whistleblowing.

The SFO said it will also prosecute Gyrus, a British medical equipment company Olympus bought in 2008. The takeover was one of the key scandals uncovered by Woodford just weeks after becoming chief executive in 2011 that led him to expose the vast corruption at the heart of the multinational.

Olympus paid $2 billion (£1.3 billion) for Gyrus — a high price — and ran up the world’s biggest takeover advisory fee, equivalent to a third of the value of the deal. Companies typically pay about 1 per cent-2 per cent in fees.

Olympus has since admitted the fee, of more than $600 million, was a fraud, disappearing into a Cayman Island fund. The deal was one of several takeovers used to cover up investment losses sustained over more than a decade.

The SFO will accuse Olympus and its Gyrus division of falsifying accounts in the financial years of 2009 and 2010. Olympus shares fell more than 6% in Tokyo on the news, before closing down about 3 per cent.

Three Olympus executives in Japan, including former chairman Tsuyoshi Kikukawa, were given suspended jail sentences for their part in the cover-up. The firm was fined 700 million yen (£4.5 million). After initially  issuing a denial over the Gyrus case in November 2011, Olympus a week later admitted its wrongdoing.

Olympus today said it was unclear how long the prosecution might last or how large any potential fines may be because of the lack of precedents for such an SFO move of prosecuting companies rather than individuals.

It also confirmed that it is still under investigation by the US Department of Justice.

Woodford, who was the first Westerner to rise to the top of a Japanese company, fled Tokyo for the UK on the day of his ousting, fearing a potential threat from Japanese yakuza gangs. He contacted the Metropolitan Police and Serious Fraud Office  when he arrived in London, and handed over documentation to prove his allegations.

Olympus has been trying to put the scandal behind it since the replacement of its entire board. Although the Japanese financial community appeared to close ranks against Woodford to block his return to the helm, it has since returned to profit. Sony paid 50 billion yen  earlier this year to become Olympus’s biggest shareholder.