Tokyo, Japan—Plagued by leadership woes and financial uncertainty since it fired its CEO/president, Michael C. Woodford, last October after he brought to light $1.5 billion accounting irregularities and a cover-up that extends back 13 years, the Olympus scandal took a new turn. Japanese authorities arrested seven people involved in the fraud, including ex-chairman Tsuyoshi Kikukawa, two other former Olympus Corp. executives and external financial advisors.
Kikukawa and the others were arrested for suspected violation of Japan’s Financial Instruments and Exchange Act by filing false reports to tax officials.
Following Woodford’s dismissal, the company’s Tokyo headquarters were raided by Japanese officials in search of evidence related to covering up investment losses since the 1990s. The scandal took on international importance, as agencies in other companies, including the U.S. FBI, began investigations. At first the company denied any wrongdoing but then admitted executives had covertly taken securities-related investment losses off its books and used acquisitions to cover up the losses. Those arrested are specifically accused of inflating the takeover costs of Gyrus Group Plc and three other Japanese companies to boost the perceived value for investors and then write it down over years to cancel out losses that were kept off Olympus’s balance sheet.
Following the admission, Kikukawa along with director/executive vice president Hisashi Mori, and the company’s corporate auditor, Hideo Yamada—also arrested—resigned their posts to instill confidence in the company. The reins were handed over to Shuichi Takayama, who is now among the company executives being sued by Olympus for failing to prevent the scandal.
The company recently announced it will select the names of candidates to form a new management team by mid-March, and that those candidates would be voted on by shareholders in an extraordinary meeting scheduled for April 20.
“After going to hell and back this is a day to remember,” Michael Woodford, Olympus’s former president, wrote in an e-mail. Woodford is currently suing Olympus over his dismissal.