Former Olympus Corp. (7733) Chairman Tsuyoshi Kikukawa received a suspended sentence for his role in a $1.7 billion accounting fraud that caused the Japanese camera maker’s market value to plunge 80 percent.
Olympus itself, also the world’s largest maker of endoscopes, was ordered to pay 700 million yen ($7 million) in fines by Tokyo District Judge Hiroaki Saito today. Former Olympus Executive Vice President Hisashi Mori and Hideo Yamada, a former auditing officer, also got suspended sentences.
Judge Saito’s decision comes almost two years after revelations that the company had falsified financial reports to conceal losses on investments. The sentences reflect the defendants’ claims that former Olympus presidents Masatoshi Kishimoto and Toshiro Shimoyama made the decision to hide losses, while he inherited the aftermath.
“Kikukawa and Yamada succeeded in a negative legacy and weren’t involved in the decision-making process to hide losses,” Saito said in court today. “They were distressed and didn’t benefit personally from hiding losses. Mori followed their orders.”
The camera maker still faces lawsuits by investors including State Street Bank and Trust & Co. and Government of Singapore Investment Corporation Pte Ltd. in a joint complaint seeking 19.1 billion yen in damages.
Kikukawa and Yamada were given three years of jail time suspended for five years, while Mori got two and a half years jail time suspended for four years. Kishimoto and Shimoyama haven’t been charged because the statute of limitations has expired, Kyodo News reported on April 23.
Prosecutors had asked for a five-year jail term for Kikukawa and a 1 billion yen fine for Tokyo-based Olympus, Kyodo News reported on March 26. Lawyers for the defendants said jailing them would be unfair because other executives involved weren’t charged, the news service reported.
The fraud, “destroyed the image of Japanese companies internationally,” Kikukawa told the court in September when pleading guilty along with the other executives.
Olympus fell 0.9 percent to 3,170 yen at the close in Tokyo trading. The shares have more than doubled in the past 12 months, compared with a 55 percent jump in the benchmark Nikkei 225 Stock Average.
Kikukawa resigned in October 2011, weeks after the board fired former President Michael Woodford, who uncovered the accounting discrepancies and went public with them after the Olympus board declined to take action. The company and three former executives eventually admitted using fraudulent takeover deals to hide losses for 13 years starting in the 1990s.
Olympus restated five years of earnings results to account for the bookkeeping fraud, wiping $1.3 billion off its balance sheet and prompting speculation the company would seek a capital infusion. Reports of the attempts to hide losses in mid-October 2011 triggered an 82 percent drop in the company’s shares between Oct. 13 and Nov. 11, 2011.
The company said in July last year it would pay 191.8 million yen in fines to Japan’s financial regulators, while the camera maker itself has sued 19 former executives for damages related to the cover up of losses.
Founded in 1919 as a microscope and thermometer maker, Olympus produced its first camera in 1936 and a predecessor to the modern-day endoscope in 1950, according to its website. The company controls 75 percent of the global market for endoscopes, instruments doctors use to peer inside the body to help diagnose disease.
A former Commerzbank AG and Societe Generale SA (GLE) banker charged with aiding the accounting fraud was granted bail in January by a federal judge in New York.
Chan Ming Fon, a Taiwan citizen living in Singapore, was indicted Jan. 17 and charged with one count of conspiracy to commit wire fraud. He faces as many as 20 years in prison on the conspiracy charge.
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