Serious Fraud Office launches Olympus prosecution

The SFO has charged Olympus Corporation and Gyrus Group Ltd with with making a “misleading, false or deceptive” statement to an auditor, contrary to section 501 of the Companies Act 2006.

The SFO accepted the case on 9 November 2011 after referral by the former CEO of Olympus, Michael Woodford (pictured below), who was sacked as the company’s chief executive in October 2011 after questioning massive payments made by Olympus.

The alleged offences are linked to the global fraud case brought by Japan against Olympus in 2011, and are said to have taken place between April 2010 and March 2011 according to the SFO. The first hearing is scheduled for 10 September at Westminster Magistrates’ Court.

In a statement, Olympus Corporation confirmed that it had been under investigation by the SFO and had been “co-operating fully”, but said that the level of damages it may need to pay as a result of the case remains “unclear”.

Japanese case

In November 2011 Olympus admitted to hiding losses on securities investments dating back to the 1980s, and that it had found that funds linked to its $2.2bn purchase of British medical equipment maker Gyrus in 2008 were used to hide losses on the securities investments. The acquisition involved a huge advisory fee of $687m and a payment of $773m for three domestic firms.

The revelations by the 92-year-old company of involvement in one of Japan’s biggest corporate frauds, appeared to vindicate the claims of Mr Woodford, who had staged a campaign since being sacked a month earlier, to force the firm to come clean on $1.3bn in questionable payments.

At the time Olympus President Shuichi Takayama blamed the cover-up on Tsuyoshi Kikukawa who resigned as president and chairman in October 2011, Vice-President Hisashi Mori, and internal auditor Hideo Yamada.

Explaining the reasons for Mr Woodford’s dismissal in 2011, Olympus said he had “largely diverted from the rest of the management team in regard to the management direction and method, and it is now causing problems for decision-making by the management team”.

But Mr Woodford claimed that unknown parties in the Cayman Islands received payments of $675m, or 36.1 per cent of the transaction price.

After Olympus threatened to sue Mr Woodford in 2011 over his comments, the 51-year-old said he had nothing to fear: “If they would like to come to London, to the high court, and go through this I’d be more than delighted. I’d relish it. Please serve the papers on me tomorrow. I would love that.”

A plunge in the company’s share price following the scandal wiped out $3.2bn of its market value.

Earlier this year Olympus was ordered to pay 700m yen (about £4.5m) in Japanese fines. Olympus and three former executives Tsuyoshi Kikukawa, Hideo Yamada and Hishashi Mori were sentenced in Japan in July.