Olympus sues bosses over cover-up

Japanese camera and medical equipment maker Olympus is suing 19 former and current executives for damages the company said it has suffered over a massive cover-up of investment losses.

The lawsuit, filed by auditors on behalf of the company in Tokyo District Court on Sunday, targets former chief executive Tsuyoshi Kikukawa, current president Shuichi Takayama and 17 other executives that Olympus claims participated in or knew about the fraudulent activity.

The scheme – which first came to light after former president Michael Woodford blew the whistle – has raised serious questions about corporate governance in Japan, and whether major firms are complying adequately with global standards.

Olympus said today that the lawsuit follows a report from an investigation by an independent panel that the Tokyo-based company had set up.

Then-president Masatoshi Kishimoto, as well as subsequent executives - including Mr Kikukawa – knew about the scheme, it said. A small circle of employees was also involved.

Six board members implicated in the report, including Mr Takayama, will resign at the next shareholder meeting, scheduled for March or April, Olympus said.

Mr Kikukawa is being sued for 3.6 billion yen (€36m). The company is seeking smaller amounts from other defendants, including 1 billion yen (€10.2m) from Mr Kishimoto.

Olympus said losses related to the cover-up scandal totalled 85.9 billion yen (€873m), according to its latest investigation.

But it will demand no more than 3.6 billion yen (€37m) in damages, which is likely to be spread among the defendants because of their inability to pay such exorbitant amounts, according to the company.

The scheme came to light late last year after Mr Woodford raised questions about huge payments for financial advice and expensive acquisitions of companies unrelated to its mainstay businesses.

The transactions, Olympus later acknowledged, were used to hide 117.7 billion yen (€1.2bn) in investment losses stemming from the 1990s.

Today’s report also identified 25 executives who were not responsible, including Mr Woodford.

Mr Woodford was fired in October after raising his concerns. Last week, he said he gave up his fight for a comeback to the top after failing to win backing from major investors and megabanks.

The British national had demanded the resignation of the entire board, including Mr Takayama, who had replaced him and initially denied any wrongdoing in the spending.

Under Japanese law, auditors represent the company when executives on the board are targeted in damage lawsuits. In the Olympus lawsuit, three auditors, two of them outsiders, are representing the company. None of them were implicated in the scandal.

Olympus claims in the lawsuit that it suffered direct losses to its finances, in terms of fees and interest paid to run the scheme – as well as losses stemming from the improper handling of the scandal after it surfaced, including how Mr Woodford was dealt with.

“The credibility of Olympus’ corporate governance and the public’s trust of Olympus were seriously damaged,” it said.

Japanese prosecutors have begun a separate investigation and raided company headquarters and Mr Kikukawa’s home last month.

Olympus barely met its mid-December deadline to avoid being removed from the Tokyo Stock Exchange by filing corrected earnings for the April-September first half and for the past five fiscal years.

Olympus’s stock has plunged amid the scandal. It surged nearly 20% today, following a report in The Nikkei financial daily yesterday that Olympus was likely to avoid delisting, but it is still trading at about half its value prior to the scandal.

Tokyo markets were closed yesterday for a national holiday.