Olympus Corp.’s former Chairman Tsuyoshi Kikukawa pleaded guilty to covering up losses at the Japanese camera maker in an accounting fraud case that sparked criticism of ineffective corporate governance in Japan.
“The entire responsibility lies with me,” Kikukawa said in Tokyo District Court today, the trial’s first day. “The action troubled shareholders, business partners, employees and the public.”
Kikukawa, former Olympus Executive Vice President Hisashi Mori and Hideo Yamada, a former auditing officer, all pleaded guilty today to using fraudulent takeover transactions to hide losses for 13 years starting in the 1990s. The executives face as much as 10 years in jail and 10 million ($128,000) in fines, according to a legal database operated by the government.
“We’re looking for a strong reaction from the court in terms of a strong sentence,” said Jamie Allen, secretary general of the Asian Corporate Governance Association. “That’s what investors are looking for and clearly that’s what the government would like.”
Olympus President Hiroyuki Sasa also submitted a guilty plea today for the company’s role in the fraud. The camera and endoscope maker faces as much as 700 million yen in fines for violating the rules, according to the government database.
Olympus rose 0.3 percent to close at 1,441 yen in Tokyo trading. Among the seven analysts who track Olympus, five have a hold rating on the stock and two recommend selling it, according to data compiled by Bloomberg.
Olympus’s market value has shrunk 42 percent since the Oct. 14 dismissal of former Chief Executive Officer Michael Woodford, who had challenged Kikukawa and the board over inflated takeover payments. Woodford’s whistleblowing led to an investigation that uncovered the accounting irregularities.
“Olympus was one of the biggest frauds in Japanese history,” Allen said in an interview aired on Bloomberg Television today. “A lot of money was lost.”
The company is now seeking investors to help shore up capital eroded after acknowledging the fraud. Sony Corp. will invest about 50 billion yen in Olympus, the Wall Street Journal reported Sept. 20, citing people with knowledge of the talks.
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.
Akio Nakagawa and Nobumasa Yokoo, investment advisers cited in an outside panel’s December report as having helped Olympus cover up losses, were also indicted separately from the three whose trial started today. The date of their trial hasn’t been decided. Taku Hada, an associate of Nakagawa and Yokoo, is also under indictment.
The accounting fraud “destroyed the image of Japanese companies internationally,” Kikukawa said today in court.