Japanese police investigating Olympus: reports

10th November 2011, Comments 0 comments

Pressure on Japan's scandal-hit Olympus intensified Thursday as police and other authorities launched investigations into the firm's concealment of investment losses since the 1990s, reports said.

The move came as a major shareholder called for the reinstatement of ousted British CEO Michael Woodford, whose removal in October revealed a fee payment scandal that has wiped more than 80 percent from the value of Olympus shares.

On Thursday, Olympus shares were down by their daily limit and ask-only at 484 yen amid concerns it will be delisted by the Tokyo Stock Exchange if it fails to release its delayed quarterly earnings report by Monday.

The Tokyo Metropolitan Police has started a full probe into whether the company may have conducted accounting fraud, the Yomiuri Shimbun said.

The police have asked Olympus to submit its accounting documents and are coordinating with Tokyo prosecutors and the Securities and Exchange Surveillance Commission, which have begun separate investigations, it said.

They may also work closely with the US Federal Bureau of Investigation and the US Securities and Exchange Commission, which are also investigating the matter, the newspaper said.

Japan's Financial Services Agency and the Tokyo Stock Exchange have also started separate investigations into Olympus and its auditing firms, the Nikkei business daily said.

A spokeswoman at the Tokyo Metropolitan Police declined to comment on the reports on Olympus, which admitted this week that it covered up losses since the 1990s using funds related to four controversial acquisitions.

It said Tuesday that investment losses -- which had been kept off the books -- were covered up by funnelling money through funds paid in the acquisition of Gyrus Group PLC and expensive purchases of three small Japanese firms.

The four deals include a $2 billion deal for British medical-instruments company Gyrus, in which Olympus has admitted paying $687 million to a little-known financial adviser based in the Cayman Islands.

The deals came to widespread attention after Olympus ousted Woodford on October 14.

Woodford contends he was dismissed after he wrote to then-chairman Tsuyoshi Kikukawa and urged him to resign over the payments, citing major governance concerns.

The 92-year old camera and medical endoscope maker has yet to reveal its losses, but media reports have said it may have concealed more than 100 billion yen ($129 million).

Baillie Gifford and Co, an Edinburgh-based investment group that held more than 4.0 percent of Olympus' outstanding shares as of October 31, said Woodford should be reinstated and install a majority of independent board directors.

"What Olympus needs now is a thorough clean-up and we believe Michael Woodford is the best man for the job," said Elaine Morrison, partner and head of developed Asia equities at Baillie Gifford.

"The current management of Olympus has been discredited by its original response to Mr Woodfords allegations and its poor communications with shareholders; we expect all directors or employees linked to this wrongdoing to be dismissed and have their ties to the company severed," Morrison said in a statement.

Another major shareholder, US-based Harris Associates L.P., has said Olympus must clarify who was responsible.

"There must be a thorough and independent investigation," said David Herro, chief investment officer for international equities at Harris.

"Olympus must make clear who was responsible for carrying out these questionable actions that have destroyed so much shareholder value," he said in a recent statement.

"The Olympus board has a serious credibility issue. The company's shareholders need clear and complete answers to the many lingering questions, and these answers need to be verified, so we can be confident that what we are now being told is in fact what happened."

© 2011 AFP

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