TOKYO (Reuters) - Japanese camera and medical equipment maker Olympus Corp and three of its former executives pleaded guilty on Tuesday over charges related to a $1.7 billion accounting cover-up in one of Japan’s biggest corporate scandals.
The scandal was exposed last October by chief executive Michael Woodford, who was sacked by the Olympus board after querying dubious deals later found to have been used to conceal the losses.
Revelations of the huge accounting fraud revived calls for more outside scrutiny of its boardrooms but have failed to trigger sweeping corporate governance reforms similar to those introduced a decade ago in the wake of U.S. scandals such as at Enron.
“The full responsibility lies with me and I feel deeply sorry for causing trouble to our business partners, shareholders and the wider public,” ex-chairman Tsuyoshi Kikukawa told the Tokyo district court at the start of the trial nearly a year after the cover-up first came to light.
“I take full responsibility for what happened.”
Prosecutors charged Kikukawa, former executive vice-president Hisashi Mori and former auditor Hideo Yamada with inflating the company’s net worth in financial statements for five fiscal years to March 2011.
The three former executives had been identified by an investigative panel, commissioned by Olympus, as the main suspects in the fraud seeking to delay the reckoning from risky investments made in the late-1980s bubble economy.
The indictment did not specify what penalties the prosecutors would seek, but lawyers have said the former executives could face up to 10 years in jail and fines of up to 10 million yen ($128,400). The company could be fined more than 100 million yen, according to the Japanese media.
What if any impact the company’s guilty plea will have on Olympus will depend on what sentence, including a possible fine, the court hands down, said Tsuyoshi Oshima, a spokesman for the medical equipment maker. That decision, he said could be several months away.
“Lawsuits from shareholders are possible,” Oshima said. The drop in Olympus’s share price has already spurred 12 lawsuits, including 11 in Japan, he said.
Woodford had campaigned to win his job back, but has since given up, blaming cozy ties between management and big Japanese shareholders and citing the strain on his family.
Olympus has already admitted it used improper accounting to conceal massive investment losses under a scheme that began in the 1990s.
In December, it filed five years’ worth of corrected financial statements plus overdue first-half results, revealing a $1.1 billion dent in its balance sheet.
With its share price hit by the scandal and a hole blown in its finances, the company has been struggling to secure funds to cover its losses, triggering talk it would need to merge or forge a business tie-up to raise capital.
On Tuesday, three sources familiar with the deal said rival electronics and entertainment giant Sony Corp. was likely to approve a plan this week to invest 50 billion yen ($642 million) in Olympus, becoming its biggest shareholder with around a 10 percent.
($1 = 77.8750 Japanese yen)
Additional reporting by Kiyoshi Takenaka, Reiji Murai and Maki Shiraki; Editing by Tomasz Janowski and Jonathan Thatcher