Olympus admits hid losses for decades

Tue Nov 8, 2011 4:33pm EST
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By Nathan Layne and Isabel Reynolds

TOKYO (Reuters) - Japan's Olympus admitted on Tuesday it hid losses on securities investments dating back two decades, bowing to weeks of pressure to explain a series of baffling transactions that have put the future of the firm in doubt.

The revelations by the 92-year-old company appear to vindicate ex-CEO Michael Woodford, who has staged a campaign since being sacked on October 14 to force the firm to come clean on nearly $1.5 billion in questionable payments.

Olympus President Shuichi Takayama blamed Tsuyoshi Kikukawa, who quit as president and chairman on October 26, Vice-President Hisashi Mori and internal auditor Hideo Yamada for the cover-up, saying he would consider criminal complaints against them.

The admission after weeks of denials shocked investors, sending shares in the endoscope and camera maker skidding almost 30 percent and prompting the biggest non-Japanese shareholder to demand the replacement of the entire board.

"Ignorance is no defense," said Josh Shores, a principal at Southeastern Asset Management, which holds 5 percent of Olympus.

"If you were there and not aware of it, then you were incompetent. If you were there, and aware of it without asking tough questions, then you were negligent. Either way, you need to leave," Shores told Reuters in London.

Olympus said it had found that funds related to its $2.2 billion purchase of British medical equipment maker Gyrus in 2008, which involved a huge advisory fee of $687 million, as well as payment of $773 million for three tiny domestic firms, were used to hide losses on the securities investments.

The investment in the three domestic firms was largely written off a few months after the deals closed.   Continued...