Olympus May Sue Executives Over Cover-Up
The Japanese camera maker has filed court papers seeking several billion yen in damages, according to the Yomiuri newspaper. It wasn’t possible to confirm the lawsuits because today is a holiday in Japan. While Olympus spokesmen weren’t available to comment, the Tokyo-based company yesterday said it was considering legal action.
Olympus should seek more than 90 billion yen ($1.2 billion) from more than 10 current and past executives, including President Shuichi Takayama, for hiding losses over more than a decade, according to the panel’s findings, Kyodo reported yesterday. Former President Michael Woodford, who was fired after he challenged the board (7733) on takeover and accounting practices, is suing the company for wrongful dismissal.
“It’s all part of the natural fallout to be expected with each party trying to stake their positions and to protect their legal interests,” said Eugene Tan, assistant professor of law at the Singapore Management University. “We’ll see suits and countersuits taking place in the next couple of weeks, if not months.”
Olympus rose 2.1 percent to close at 1,053 yen as of the 3 p.m. end of trading on the Tokyo Stock Exchange on Jan. 6. The shares (7733) have lost 58 percent since Woodford was fired.
Olympus will announce its response to the panel’s report tomorrow, it said in a statement to Tokyo’s stock exchange yesterday. The company declined to comment on the Kyodo report, Yoshiaki Yamada, a spokesman, said yesterday. Details of the findings will be released tomorrow, the Yomiuri reported today.
The claims Olympus filed at the Tokyo district court were against about 20 past and current executives, including six sitting board members, the Yomiuri said, citing a person familiar with the matter. The Nikkei newspaper also reported the filing of court papers.
The company inflated fees to advisers on the $2.1 billion acquisition of Gyrus Group Plc in 2008 and overpaid in purchasing three Japanese companies with the intention of increasing goodwill, a separate independent panel investigating the fraud said last month. The panel said it found a culture of “yes men” and a board that failed in its duty to stop a “rotten” core of executives from duping auditors, regulators and investors.
Woodford filed a case in the U.K. last week seeking damages for the remainder of his four-year contract and additional costs. Before being named as Olympus’s first non-Japanese president and chief executive officer last year, the British national ran the company’s European operations, where he won praise from analysts for cutting costs and improving profitability. Woodford last week said he may also sue in Japan.
The 51-year-old former CEO also abandoned efforts to regain control of Olympus after failing to gain support from Japanese shareholders.
Olympus’s biggest (7733) shareholder, Sumitomo Mitsui Financial Group Inc. (8316), said after Japanese prosecutors raided the camera- maker’s offices that it would maintain support for the company. Southeastern Asset Management Inc., the company’s biggest overseas stockholder, and Harris Associates LP have said the entire board and all executives involved in the fraud must go.
The company “continues to suffer under shoddy corporate governance and an utterly discredited board,” Josh Shores, a London-based principal at Southeastern Asset, said in a Jan. 6 statement. “We maintain that the board should be replaced and a new board should oversee the company’s revival.”
$5 Billion Slide
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 (7733) about $5 billion of market capitalization since firing Woodford and was forced to restate more than five years of earnings (7733) last month to avoid an automatic delisting from the Tokyo Stock Exchange after admitting to the 13-year cover-up.
The 92-year-old company’s net assets (7733) fell by 105 billion yen to 46 billion yen after the restatement, while it was still at risk of being delisted pending a review by the TSE.
The bourse is preparing to allow Olympus to stay listed and fine the company 10 million yen instead, the Yomiuri reported earlier, without saying how it got the information. The TSE may make a final decision this month, the report said.
The company, also the world’s largest maker of endoscopes, faces criminal probes in the U.S. and U.K., as well as Japan, since Woodford made the takeover payments public in October.
Olympus last week said it may hold may hold an emergency shareholder meeting as early as March depending on the results of the panel reviewing management at the company.
To contact the editor responsible for this story: Neil Denslow at email@example.com