Olympus sues current president, ex-directors over $1.7 bn fraud

Tokyo: Japan’s Olympus Corp has sued its current president and three ex-directors for several million dollars in compensation, sources told Reuters on Monday, as the company seeks to draw a line under one of the nation’s worst accounting scandals.

The maker of cameras and medical equipment filed suit against its president, Shuichi Takayama, with the Tokyo district court on Sunday, along with three former executives identified by investigators as having engineered or helped cover up a $1.7 billion fraud at the firm, the sources said.

Takayama is planning to resign as a result of the lawsuit, said the sources who were familiar with the matter.

An Olympus spokesman confirmed on Monday that lawsuits had been filed but declined to give details, saying these would be revealed at an announcement due on Tuesday. The writs are sealed and were not available for public examination on Monday.

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An outside investigative panel recently found former Chairman Tsuyoshi Kikukawa, former Executive Vice President Hisashi Mori and former auditor Hideo Yamada had played leading roles in a 13-year scheme to hide losses from Olympus investors.

The panel found the trio had misled investors about the company’s financial health after it suffered heavy losses on investments dating from the early 1990s. It also found Takayama and other current directors had failed in their oversight.

A separate, internal panel has recommended Olympus seek 90 billion yen in damages from those involved in the scandal. This group’s report has not been made public.

The firm instead chose to sue for several billion yen, taking into account the ability to pay, sources said.

Olympus has lost nearly 60 percent of its market value since the scandal first erupted in October, when it fired Woodford, a rare foreign CEO in Japan, for questioning dodgy acquisition deals at the heart of the scandal. Woodford immediately went public with his concerns after his sacking.

Prosecutors and other authorities are still investigating the scandal, which could lead to criminal charges.

Woodford, who on Friday dropped his bid to be reinstated as CEO, said he would sue Olympus for unfair dismissal and had instructed his lawyers to begin legal action in Britain.

The firm’s existing board plans to resign and aims to hold an extraordinary shareholders’ meeting in March or April where a new team of directors would be voted in.

OLYMPUS LIKELY TO REMAIN LISTED

Many investors are optimistic that Olympus can remain listed on the Tokyo exchange, and hope that police, prosecutors and regulators do not turn up fresh evidence. Delisting would cut the firm off from equity markets and jeopardise its funding at a time when fresh capital is needed to repair its balance sheet.

The Tokyo Stock Exchange is in final talks to keep Olympus listed with a designation as a “security on alert”, sources familiar with the matter said on Monday. The exchange also plans to fine the company 10 million yen, sources added.

Once classed as “on alert”, Olympus would effectively be on probation, allowed to keep its listing provided it showed steady progress on improving its internal controls, information provided on the exchange’s website shows.

Once the exchange is satisfied that internal controls have been rectified, the stock can regain its normal listing status.

Reuters