updated 04:50 am EST, Thu February 16, 2012
Olympus account fraud results in multiple arrests
Former Olympus President Tsuyoshi Kikukawa, former Executive Vice President Hisashi Mori and former auditor Hideo Yamada have been arrested in the wake of the company's massive $1.7 billion accounting fraud scandal. Reuters reports that Japanese authorities arrested the trio on the grounds that they may have violated Japan's Financial Instruments and Exchange Law. Officials also took former bankers Akio Nakagawa and Nobumasa Yokoo into custody, and two others for their role in the cover-up.
The arrests were hinted at recently by former Olympus CEO Michael Woodford, who blew the whistle on the cover-up following a massive overpayment to a Cayman Islands company for their role in a recent Olympus acquisition. Woodford discovered a trail of overpayments that eventually were revealed as attempts to conceal financial losses sustained by the company over two decades. When he fronted the Olympus board about his discovery, he was dismissed after threatening to go public with his discovery.
'After going to hell and back, this is a day to remember, Woodford said in response to the developments. After trying and failing to be reinstated as Olympus CEO, Woodford is said to be planning to write a book about his experience.
After the scandal broke, the Japanese stock exchange forced Olympus to review its actual finances for the past five years. The re-audit showed that the company $1.1 billion worse off than had previously seemed to be the case resulting in an urgent need to forge strategic alliances. Among those interested in a slice of Olympus' highly profitable endoscope business include Sony, Fujifilm, and Samsung.
News of the arrests is reported not to have destablized those talks as they are underway with a new executive team. Among them include three board members not involved in the scandal, Masataka Suzuki, Kazuhiro Watanabe and Shinichi Nishigaki, all three of whom are in line to succeed Michael Woodford as Olympus CEO.