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The special investigation squad of the Tokyo District Public Prosecutors Office on Dec. 21 raided the head office of Olympus Corp., the home of its former president and chairman Tsuyoshi Kikukawa and the offices of three firms that Olympus purchased, in connection with the major camera and endoscope firm’s massive accounting scandal. The Metropolitan Police Department and the Securities and Exchange Surveillance Commission joined the searches.

It is hoped that the investigation this time will clarify points that a third-party committee appointed by Olympus could not fully discover. These points would include what outside people helped Olympus hide its latent losses from investments in the 1990s, whether the firm paid illegal dividends, whether it had connections with underworld organizations and whether Olympus executives illegally pocketed money.

The committee has already discovered the outline of the scandal. The firm was found to have used an elaborate scheme to hide ¥117.1 billion in investment losses by turning back ¥134.8 billion out of funds set aside to acquire a series of other firms.

The committee thinks that Mr. Kikukawa, former executive vice president Hisashi Mori and former auditor Hideo Yamada played a leading role in the scandal.

It said that Mr. Mori and Mr. Yamada received help from a former employee of a securities company in developing the loss hiding scheme. It is expected that the three former executives will be the main target of the investigation this time.

It has now surfaced that, in December 2008, an audit corporation pointed out to Olympus’ management that the price of the acquisition of three Japanese firms from 2006 to 2008 and the advisory fees in the acquisition of British medical equipment maker Gyrus Group were exorbitant. It even mentioned the need to remove Mr. Kikukawa and other executives. Soon afterward, Mr. Kikukawa and Mr. Yamada ended the contract with the audit corporation. The contract had lasted for about 35 years.

Olympus’ current management plans to propose the renewal of the management setup and a reconstruction plan at an extraordinary shareholders’ meeting in March or April. To regain the trust of markets and the public, current executives, at the very least, should make clear whether they were involved in the loss hiding operations or whether they had known about them.

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