By Mariko Yasu - Dec 6, 2011 4:07 PM GMT+0700
Olympus Corp. risks being delisted even if it makes a Dec. 14 deadline to announce earnings, the Tokyo Stock Exchange said after the release of an independent report into false accounting by the Japanese camera maker.
Senior management was “rotten to the core” and corrupted other layers of executives that touched it, according to the report of a panel probing Olympus’s schemes to cover up 135 billion yen ($1.7 billion) in losses and payments to advisers dating back decades. Failings by auditors and aid from banks in Europe and Singapore helped hide the losses, it said.
The exchange’s statement may undermine a rebound in Olympus shares since the company first admitted on Nov. 8 to using inflated takeover costs and advisory fees to hide investment losses dating back decades. Investigators in Japan, the U.S. and U.K. are still probing the transactions amid allegations kickbacks may have gone to organized crime.
“All of the people involved should be taken to court and made to pay for the damage they have done to the regular employees, stockholders,” said Edwin Merner, who helps oversee about $3 billion as Tokyo-based president of Atlantis Investment. “They will probably get off lightly since the politicians and bureaucrats are also mixed up in funny business and feel sympathy for top management since they could very well be next.”
Olympus said in a statement it accepts the panel’s report and that it will make all efforts to ensure it isn’t delisted. The Tokyo exchange said the report showed Olympus would have to restate its financial reports and that this may have a significant impact on the company, a condition for delisting.
No Evidence
The panel said it found no evidence that money was funneled to antisocial forces, a byword for criminal gangs. Masatoshi Kishimoto, 75, who was company president for eight years from 1993, and his successor Tsuyoshi Kikukawa were among former executives at Tokyo-based Olympus involved in the cover-up, according to the report.
The 26-page summary of a larger report stopped short of calling for a wholesale change in management at the company, saying the conspiracy was restricted to a small circle and wasn’t systemic.
Woodford’s Dismissal
The report came seven weeks after the dismissal of former Chief Executive Officer Michael C. Woodford, who questioned $1.4 billion in takeover costs including fees paid to a now-defunct Cayman Islands fund in the $2.1 billion takeover of Gyrus Group Plc in 2008. The 51-year-old British citizen resigned as a director Dec. 1 in the first step of a campaign to take control of the company from the board that fired him Oct. 14.
Shareholders should be given a chance to vote for new management after Olympus admitted Kikukawa and senior aides colluded to cover up losses dating back to the 1990s, Woodford said last week. Southeastern Asset Management Inc., Olympus’s largest overseas stockholder, joined Woodford in calls for a change of management.
Olympus shares, which declined to their lowest in 36 years on Nov. 11, rose 9.1 percent at the 3 p.m. close of trading in Tokyo, before the panel’s report. The stock has declined 52 percent since the dismissal of Woodford.
The company began making financial investments after 1985 as a strong yen hurt operating profit, the panel said. When Japan’s stock-market bubble burst at the end of 1989, the company purchased high-risk products and structured bonds in an effort to recoup the loss. In late 1990, the company had a little less than 100 billion yen of unrealized losses.
Olympus is “cooperating fully with investigators” including the Tokyo District Public Prosecutors Office, the Tokyo Metropolitan Police and Japan’s Securities and Exchange Surveillance Commission, spokesman Tsuyoshi Kitada said Dec. 5, declining to elaborate further.
To contact the reporter on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net
To contact the editor responsible for this story: Ben Richardson at brichardson8@bloomberg.net
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