Olympus may sue execs over cover-up

Olympus, the camera-maker that admitted hiding losses for more than a decade, says it is considering suing present and past executives after receiving a report from a panel probing management responsibility for the cover-up.

The company will announce its response to the panel's report today, it told the Tokyo Stock Exchange yesterday.

Olympus should seek damages of more than 90 billion ($1.5 billion) from more than 10 present and past executives, including president Shuichi Takayama, for covering up huge losses, said the panel's report, Kyodo reported yesterday.

Former chief executive Michael Woodford, who was fired after he questioned $1.5 billion in takeover costs, is suing the company over his dismissal.

The company inflated fees to advisers on the 2008 acquisition of Gyrus Group and overpaid in purchasing three Japanese companies with the intention of increasing goodwill, a separate independent panel said last month. The panel said it found a culture of "yes men" and a board that failed to stop a "rotten" core of executives from duping auditors, regulators and investors.

Tokyo-based Olympus admitted in November that former chairman Tsuyoshi Kikukawa, Hisashi Mori, who was fired as executive vice-president, and Hideo Yamada, a former company auditor, colluded to hide losses on securities investments in the 1990s.

The company has lost about US$5 billion ($6.4 billion) of market capitalisation since firing Woodford and was forced to restate more than five years of earnings last month to avoid an automatic delisting from the Tokyo Stock Exchange after admitting to a 13-year cover-up.

The 92-year-old company's net assets fell by 105 billion to 46 billion after the restatement, while it was still at risk of being delisted pending a review by the TSE. The earnings restatements prompted Rating and Investment Information, a Tokyo-based credit-rating company, to cut its assessment of Olympus two steps to BBB-, the lowest investment grade.

The Tokyo Stock Exchange is preparing to allow Olympus to stay listed and fine the company 10 million instead, the Yomiuri newspaper reported, without citing a source. The bourse may make a final decision this month, the report said.

Olympus rose 2.1 per cent to close at 1053 at the end of trading on the Tokyo Stock Exchange on January 6. The shares have lost 58 per cent since Woodford was fired.

The 51-year-old former CEO filed a case in Britain last week seeking damages for the remainder of his four-year contract and additional costs. The British national said last week he may also file a case in Japan.

Woodford also abandoned efforts to regain control of Olympus after failing to gain support from Japanese shareholders.

Olympus' biggest shareholder, Sumitomo Mitsui Financial Group, said after Japanese prosecutors raided the camera-maker's offices that it would maintain support for the company. Southeastern Asset Management, the company's biggest overseas stockholder, and Harris Associates have said the entire board and all executives involved in the fraud must go.

The company, which is also the world's largest maker of endoscopes, has become the centre of criminal investigations in New York and the UK as well as Japan, since Woodford made the takeover payments public in October.

Olympus said last week it may hold an emergency shareholder meeting as early as March depending on the results of the panel reviewing management at the company. Woodford said last week that allowing the present board to remain was damaging to the company.

Takayama, who was named president in October after Kikukawa stepped down, is preparing to resign, Kyodo reported yesterday.

He has said he wanted to win back investor confidence by revamping management and carrying out an internal inquiry to find other executives involved in the cover-up.

Founded in 1919 as a microscope and thermometer business, Olympus produced its first camera in 1936 and its first "gastrocamera", a predecessor to the modern-day endoscope, in 1950, said its website.

- BLOOMBERG

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