Olympus trio face weekend interrogation

Woodford will arrive next week to meet with investigators

Kyodo

Tokyo prosecutors plan to quiz three executives of Olympus Corp. on a voluntary basis possibly this weekend about their involvement in covering up investment losses, sources said Friday.

Ousted Olympus President Michael C. Woodford will also come to Japan next Wednesday to meet the prosecutors, Tokyo police and the Securities and Exchange Surveillance Commission next Thursday.

Former Chairman and President Tsuyoshi Kikukawa, former Executive Vice President Hisashi Mori and auditor Hideo Yamada have admitted being involved in covering up investment losses, the camera and medical equipment maker said earlier. Kikukawa and Mori are still board members.

Tokyo prosecutors plan to grill accounting and other Olympus officials as well as the three, the sources said.

Olympus covered up unrealized investment losses in the 1990s by transferring them to investment funds when mark-to-market accounting principles were introduced in 2001 requiring firms to specify unrealized losses in financial statements, they said.

From 2006 to 2008, Kikukawa and other Olympus executives covered some of these losses with payments to advisers for the company’s acquisition of British medical equipment company Gyrus Group PLC.

The commission is investigating the investment loss coverup, suspecing fraudulent deals and falsified financial statements.

Woodford was dismissed from his posts Oct. 14 after calling into question the firm’s acquisition in 2008 of Gyrus Group, for which Olympus paid $687 million in dubious, Cayman Island-linked advisory fees, equivalent to nearly a third of the ¥210 billion purchase price.

Its biggest shareholder, Nippon Life Insurance Co., has recently sold part of its stake in the scandal-hit camera and endoscope maker, according to a report the insurer submitted Thursday to financial regulators.

The insurance group’s stake in Olympus, which has admitted to hiding past investment losses, has been reduced to 5.1 percent from 8.1 percent, the report says. But the insurer appears to remain Olympus’ leading shareholder.

Although the insurer did not disclose when it sold the shares, a company official said the plunge in the stock price forced its hand.

“We sold some of the shares from the perspective of protecting policyholders” after Olympus’ stock price fell considerably from the scandal.

“We’ll continue supporting Olympus in light of its advanced technology in the core business (such as endoscopes),” the official said.

Olympus has admitted using funds for past acquisitions, including of Gyrus, to hide latent losses on securities investments since the 1990s.

According to Olympus, it overstated net assets by $18 million, or about ¥33.4 billion, for the business year that ended in March by padding expenses to buy Gyrus.

The company plans to book impairment losses for the net assets and correct its past financial statements.

The New York Times reported Thursday that Japanese officials said at least $4.9 billion is unaccounted for in the Olympus scandal and are investigating whether some of the money went to companies with links to organized crime.

They are trying to determine whether Olympus worked with underworld syndicates to obscure billion of dollars in past investment losses and then paid them exorbitant sums for their services, the paper said in a dispatch from Tokyo.

According to explanations the company offered to creditor banks and financial institutions Wednesday, it expects to post an operating profit of ¥16.9 billion for the April to September period, down slightly from a year earlier, on sales of ¥416.3 billion.

For the business year ending next March, the company said sales are likely to fall 7.2 percent from the previous year to ¥790 billion, but it expects to secure an operating profit of ¥35.6 billion, up 5.6 percent from the previous year, through cost-cutting efforts.

Olympus said it plans to report its earnings for the fiscal first half by Dec. 14, the deadline stipulated by law to remain listed on the Tokyo Stock Exchange.