Olympus Whistleblower Said to Face Questions by SEC in U.S. Investigation
Former Olympus Corp. (7733) President Michael C. Woodford was asked to return for a second interview by U.S. investigators -- this time including the Securities and Exchange Commission -- in a federal probe of hundreds of millions of dollars in advisory fees paid by the Japanese company, a person familiar with the matter said.
Woodford, the whistleblower who was fired after he asked the board to review the payments made as part of acquisitions, voluntarily traveled from the U.K. to New York last month to meet with FBI agents and prosecutors from the complex fraud unit of Manhattan U.S. Attorney Preet Bharara, said the person.
During the three-hour meeting, Woodford turned over documents that included a PriceWaterhouseCoopers LLP report that he commissioned as president into the payments, according to the person, who didn’t want to be identified because the matter isn’t public.
“He came on his own initiative,” Homer Moyer, a lawyer for Woodford in Washington, said today in a phone interview. “When the revelations came out about the company, I reached out to the Department of Justice and the SEC. He’s very much in a voluntary and cooperative mode.”
The meeting with U.S. authorities, that also includes representatives from Bharara’s office and the FBI, may take place as early as this month and would be the first to involve investigators from the SEC, Moyer said.
The request of Woodford may indicate a heightened interest U.S. authorities are taking in Olympus after the company admitted last week that three executives colluded to hide losses from investors. Regulators are interested because Olympus’s American depositary receipts are traded in the U.S., the person said.
The company first denied there was any wrongdoing involving $687 million in advisory fees paid on the $2 billion acquisition of Gyrus Group Plc in 2008, and later said it paid inflated fees to advisers to hide losses.
“We’ll provide them with any information they’d like and he’ll be helpful,” Moyer said. Woodford feels the reception he has received from U.S. investigators has been “very satisfying,” Moyer said.
Woodford also has met with the intelligence team at Britain’s Serious Fraud Office, which started a formal probe this week into accounting irregularities at the Tokyo-based camera and endoscope maker, according to another person familiar with that case, who also declined to be identified because the matter isn’t public. The SFO, which prosecutes white-collar crime, will work with the U.S. Justice Department and Japanese authorities, the person said.
Woodford may also meet with Japanese police in Tokyo this month, the person said. He hasn’t returned to the country since he left immediately after he was fired.
Japanese officials are investigating whether Olympus worked with organized crime to hide billions of dollars of losses, the New York Times reported, citing a memo circulated at a meeting of police and regulatory authorities. At least $4.2 billion remains unaccounted for, according to the report.
Olympus has an independent committee looking into how the company concealed investment losses, said Tsuyoshi Kitada, an Olympus spokesman in Tokyo, when asked to comment on the report.
‘We Are Ready’
“If any official investigation requests information from Olympus, we are ready to provide our full cooperation,” said Franziska Jorke, a spokeswoman for Olympus in Germany, in an e-mail, declining to comment further.
The Federal Bureau of Investigation in New York and Bharara’s office are trying to determine whether there was any wrongdoing over advisory fees paid on the Gyrus deal and three other acquisitions.
The probe centers on fees paid to Axam Investments Ltd., a now-defunct Cayman Islands fund connected to U.S.-based Japanese banker Hajime Sagawa, for advising on the Gyrus deal, a third person familiar with the matter said.
Sagawa hasn’t been charged with criminal wrongdoing. The FBI and Manhattan U.S. Attorney’s Office would have jurisdiction in an investigation because Sagawa rented office space in a building next to Grand Central Terminal in New York while Axam worked on the Gyrus deal, said that person, who also didn’t want to be identified because the matter wasn’t public.
The person said the investigation was a complex matter and immediate criminal charges weren’t likely.
John Nestor, a spokesman for the SEC, declined to comment on the probes, including the request to meet with Woodford. Ellen Davis, a spokeswoman for the Manhattan U.S. Attorney’s Office, and J. Peter Donald, a spokesman for the FBI’s New York Office, also declined to comment.
$1.5 Billion Siphoned
Olympus said last week that an independent committee it appointed to look into its acquisitions is still examining the method used to hide the losses. The company also said that it continues to pursue an internal investigation into Woodford’s allegation that $1.5 billion was siphoned from the company through writedowns and takeover-related fees.
One member of the independent committee may fly to London in the next few weeks to meet with Woodford, the first person said.
Olympus President Shuichi Takayama said it was looking into the role played by special purpose funds in hiding the losses, which date back to the 1990s. The company fired Executive Vice President Hisashi Mori over his role in the alleged cover-up, former Chairman Tsuyoshi Kikukawa resigned last month, and auditor Hideo Yamada will step down.
Japan’s Securities and Exchange Surveillance Commission and Tokyo prosecutors are also investigating, the person said.
Potential offenses by Olympus include false accounting and breaches of duties by the board, according to the Oct. 11 PwC report. Possible federal criminal charges in the U.S. could include accounting fraud, said the third person familiar with the matter.
None of the former Olympus officials have been charged with any wrongdoing in the matter.
Similar charges were brought against former Enron Corp. chief executive officers Kenneth Lay and Jeffrey Skilling. Both men were convicted of deceiving shareholders about Enron’s financial condition by hiding debt and losses in a series of off balance-sheet entities.
Prosecution of a Japan business by the U.S. isn’t unprecedented. In the mid 1990s, Daiwa Bank Ltd. pleaded guilty in federal court in Manhattan to charges it covered up more than $1 billion in trading losses at its New York branch.
Daiwa agreed to pay $340 million in fines. One of Daiwa’s managers, Toshihide Iguchi, in New York, pleaded guilty to securities fraud for using money he stole from the bank and its accounts to cover up for $1.1 billion in trading losses.