TOKYO/LONDON (Reuters) - Britain’s fraud prosecutor has charged Japan’s Olympus Corp and its British subsidiary Gyrus with misleading or deceiving an auditor, dragging a $1.7 billion accounting scandal back into the spotlight two years after it first erupted.
Olympus, once one of Japan’s most venerable companies, saw its shares and profits plunge after its former British CEO, Michael Woodford, alerted prosecutors and the media to a series of shady payments after being fired for questioning company accounts in 2011.
Since then the medical equipment to camera maker has swung back to profit, Sony Corp paid 50 billion yen ($500 million) to become its biggest shareholder this year and the company in July raised $1.2 billion in a share issue.
Olympus said earlier on Wednesday it expected Britain’s Serious Fraud Office (SFO) to press charges, sending its shares down as much as 6.3 percent, although the stock recovered to end the day down 2.9 percent at 2,798 yen.
Three former Olympus executives, including former chairman Tsuyoshi Kikukawa, were found guilty by a Japanese court in July. They were handed suspended jail sentences while the company was fined 700 million yen ($7 million) for violating securities laws.
The SFO said Olympus faced one charge of making a statement to an auditor which was misleading, false or deceptive, while Gyrus, whose purchase by Olympus in 2008 was coupled with an inflated advisory fee, faced four charges. The SFO said it was focusing on alleged offences between April 2010 and March 2011.
The first UK court hearing will take place on September 10.
Woodford said in an email it would be inappropriate for him to comment about a criminal prosecution, but noted: ”It is in the public domain that following my dismissal from Olympus in October 2011, on my return to London I immediately visited the SFO to advise them of my concerns and provided them with all the information in my possession.
“Shortly after this, in November 2011, the SFO opened a formal investigation and the charges against Olympus Corporation and its UK unit Gyrus Group Limited is the culmination of this.”
GREEN‘S FIRST CORPORATE PROSECUTION
SFO head David Green, who has overhauled the cash-strapped agency since taking the helm in April last year, has been keen to bring more companies to book - a tough task, given the SFO has to show company bosses are complicit to prove corporate criminal liability.
Stephen Parkinson, a lawyer at Kingsley Napley, noted the Olympus charges would be the first corporate prosecution brought under Green’s leadership.
“This is a significant development for the SFO,” Parkinson said. “There is little case law on sentencing for companies, but a recent consultation ... suggests that a fine on any conviction in this case could be very significant.”
An Olympus spokesman said the company was also still under investigation by the U.S. Department of Justice.
Olympus’s board resigned in the wake of the scandal, while the three former executives and the company itself pleaded guilty last September to charges related to a cover-up.
Olympus bought Gyrus, a medical equipment firm, for $2 billion in 2008. In addition to paying the world’s largest advisory fee - equivalent to one-third of the purchase price - Olympus later wrote down the value of the deal along with a handful of other acquisitions.
The deal was part of a scheme to cover up investment losses dating back as much as a decade or more.
SFO chief Green is under pressure to deliver convictions and restore faith in an agency which, under predecessor Richard Alderman, has been accused by lawmakers of a “catalogue of errors and poor judgment”.
The SFO’s notable successes - such as last year’s conviction of fraudster Asil Nadir 19 years after he fled the UK - have been overshadowed by failures, such as a botched probe into the Tchenguiz property moguls that left it nursing a 300 million pound damages claim.
The agency’s largest and most complex current investigation is a global inquiry into the rigging of Libor benchmark interest rates, over which three individuals have been charged to date.
($1 = 99.8050 Japanese yen)
Editing by Chris Gallagher and David Holmes