Scandal-hit Olympus warned of possible delisting

10th November 2011, Comments 0 comments

Pressure mounted on Japan's Olympus Thursday after the Tokyo bourse warned it could face delisting, amid reports police are investigating the firm after it admitted concealing losses for decades.

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.

The stock resumed its plunge Thursday, diving 17.12 percent amid a glut of sell-orders with the future of the 92-year-old company shrouded in uncertainty.

Olympus said it would be unable to give earnings for the quarter ended September by Monday's deadline for listed firms, as it undergoes a probe into payments it admitted were used to cover investment losses dating back to the 1990s.

The Tokyo Stock Exchange said it will place Olympus on its "supervision" watch list to give investors time to prepare if the stock needs to be delisted.

If Olympus fails to report its second-quarter earnings under the law by December 14, its shares will be delisted soon after, the statement said.

Delisting would effectively wipe out the value of the shares and trigger a wave of lawsuits, say analysts.

Olympus said Tuesday that investment losses -- which had been kept off the books -- were covered up by funnelling money through funds paid in four deals that have brought scrutiny due to the size of payments involved.

The four deals include a $2 billion 2008 agreement 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 fee totaled more than a third of the company's purchase price, much larger than the one or two percent normally charged in acquisition deals.

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

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.

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 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 instal 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.

Separately, another company Daio Paper said it too will be unable to meet the Monday earnings deadline, with TSE also moving the company to its delist watch.

The paper manufacturer has said its former chairman had used more than 10 billion yen of company funds on gambling expeditions.


© 2011 AFP

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