Olympus Corp., the Japanese camera and endoscope maker that admitted a 13-year accounting fraud, and six individuals were indicted by prosecutors for falsifying securities reports, increasing concern the probe may widen.
Former chairman Tsuyoshi Kikukawa, former executive vice president Hisashi Mori and ex-auditing officer Hideo Yamada, were prosecuted, according to a faxed statement from the Tokyo District Public Prosecutor’s office today. The three were arrested last month for suspected violation of Japan’s Financial Instruments and Exchange Act.
The endoscope maker’s market value has tumbled 48 percent since the Oct. 14 dismissal of former chief executive officer Michael Woodford, who had challenged Kikukawa and the board over inflated takeover payments. Olympus’s Tokyo headquarters and its affiliated offices were raided in December by prosecutors after the company said the three former officials colluded to hide investment losses from the 1990s.
“The company’s indictment could lead to more concerns that the fraud was organizational,” said Mitsushige Akino, who oversees about $600 million at Ichiyoshi Investment Management Co. in Tokyo. “Investors won’t be wanting to buy a stock like this.”
Olympus fell as much as 2.3 percent to 1,270 yen and changed hands at 1,285 yen as of 2:03 p.m. in Tokyo. Three of the four analysts covering the company’s shares recommend investors “sell” the stock while one advises a “hold,” according to data compiled by Bloomberg.
The Tokyo Stock Exchange in January allowed Olympus to keep its stock market listing by fining the company 10 million yen ($123,800) and telling it to submit reports on efforts to improve management. The exchange put Olympus on a watchlist last year after the company admitted to inflating fees to advisers on the $2.1 billion acquisition of London-listed Gyrus Group Plc in 2008 and overpaying for three Japanese companies.
The company is unlikely to be delisted from the stock exchange, Akino said.
“We take the indictment seriously and will try to strengthen our corporate governance,” the company said in a statement today. The company’s shareholders are due to meet next month to select a new management.
Woodford went public with queries he raised with Kikukawa and Mori over $687 million in advisory fees in the acquisition of medical company Gyrus, as well as writedowns of stakes in three other takeovers.
The prosecutors also indicted Akio Nakagawa, Nobumasa Yokoo -- both cited in a December panel report as having aided Olympus in structuring its loss-hiding proposals -- and Taku Hada, who was arrested last month.
Founded in 1919 as a microscope and thermometer business, 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 look inside the body’s cavities to help detect disease.