Olympus’ former chairman, executives plead guilty in fraud case
posted Tuesday, September 25, 2012 at 7:46 PM EDT
Almost a year ago, Olympus Corp. was rocked by an accounting scandal that obliterated four-fifths of its stock's value within a frantic month's trading. Over the following weeks, it became clear that the fraud took place at the very highest levels of the company's management. Several high-level executives at Olympus stepped down from their roles, and along with staff from the company's third-party advisors, were arrested by Japanese police. Among their number were then-Olympus chairman and former CEO Tsuyoshi Kikukawa and executive vice president Hisashi Mori, as well as corporate auditor Hideo Yamada.
As the anniversary of the story's first breaking nears, a case is now being heard in the Tokyo district court, marking the first criminal prosecution to take place since the arrests. Kikukawa, Mori, and Yamada all stand before the court, as does Olympus itself as a corporation. In the case's first day, Japan's Daily Yomiuri newspaper among others reports that all three individuals have now entered pleas to the charges before them, as has Olympus Corp., represented by new company president and CEO Hiroyuki Sasa.
In entering his plea, the 71-year old Kikukawa is said to have claimed full responsibility for the scandal, and apologizes to the company's employees, shareholders, partners and customers for the damage done to Olympus, as well as to the wider public for the damage done to the image of corporate Japan and its stock market. In a prepared statement, Kikukawa also suggested that on learning of the losses and coverup instituted by his predecessors, he had faced a period of anguish over how to proceed. He went on to profess deep regret for having taken the decision not to disclose these facts.
Although no comments are attributed to Mori, 67, and Yamada, 55, both men are said to have entered guilty pleas as well. On behalf of Olympus, Sasa--who joined Olympus's medical division in the 1980s and took over the company's helm earlier this year--is said to have accepted the charges against the company with an apology.
No suggestion has yet been made as to what penalties prosecutors will seek in the case, but the Wall Street Journal suggests each executive could receive up to ten years in prison, a fine of ¥10 million (approx. US$130,000), or both. Olympus Corp., meanwhile, could be fined up to ¥700 million (US$9 million). The Financial Times points out that it is common for white collar criminals in Japan to receive only a suspended sentence or fine.
Of course, there's still the matter of civil suits that are expected to follow the case. Olympus is said to have sued Kikukawa for some ¥4.6 billion (US$59 million) in damages, and there are apparently now a dozen lawsuits from shareholders seeking damages in the billions of yen.
The individuals from Olympus' outside advisor who assisted in the Tobashi coverup scheme and were arrested at the same time as Kikukawa et al., meanwhile, are to be tried separately. They include Akio Nakagawa, formerly of Axes Japan Securities, who helped create the web of companies used to conceal Olympus losses sustained in the 1990s; Nobumasa Yokoo, president of Global Co., who assisted in Olympus' purchase of several unprofitable Japanese companies as part of the scheme; and two other executives of Global Co., Taku Hada and Hiroshi Ono.
The scandal first broke in October 2011, when newly-appointed president and CEO Michael Woodford was prompted by rumors in the Japanese media to confront chairman Tsuyoshi Kikukawa, leading to an abrupt dismissal from both roles. Woodford, who for a time hoped to return to the company's helm, has since abandoned these plans and won a rumored £10 million (US$16 million) settlement after alleging discrimination and wrongful dismissal. He is expected to release a book detailing the scandal from his point of view by this November.
As for Olympus, the company's stock has recovered significantly, but is still down from pre-scandal levels by some 40 percent. Rumors continue to swirl that Sony Corp. will soon announce a ¥50 billion (US$640 million) investment in Olympus, to become its largest shareholder with a stake of roughly 10 percent, and a Sony executive on the Olympus board. The company has no comment to offer either on these rumors, or on the ongoing court case.