Seven arrested in Olympus accounting cover-up
OSAKA, Japan — The Japanese authorities arrested seven central figures in the huge accounting scandal at Olympus — including the camera-maker’s former chairman and executive vice president — on Thursday as part of investigations into a decade-long cover-up that has prompted concern over what critics say is lax corporate governance at Japanese companies.
Tsuyoshi Kikukawa, a former chairman and president of Olympus, was arrested in Tokyo along with two other former executives on suspicion of having falsified financial statements, Tokyo prosecutors said. Two former investment bankers suspected of helping to set up the cover-up, and two of their associates, were also arrested.
Olympus said that it was aware of the gravity of the situation and was cooperating fully with the authorities.
A panel of experts hired by Olympus to investigate the cover-up has accused the former executives of masking investment losses racked up in Japan’s bubble economy over a period of at least 13 years. Those losses were eventually accounted for in transactions disguised as merger fees paid to overseas investment funds.
The irregular accounting came to light in October when Olympus fired Michael C. Woodford, who was its president and chief executive.
At the time, Kikukawa attributed the dismissal to Woodford’s aggressive Western management style. But Woodford, a Briton, said he had been fired for questioning a series of payouts made by the company between 2006 and 2008, and he provided what he said was evidence to the news media. Kikukawa subsequently resigned from the company.
Woodford then began a bid to return to Olympus, whose share price has collapsed since the scandal broke, to lead a turnaround. But he abandoned that bid in December after the company’s biggest domestic shareholders sided against him in a move that some foreign investors have said confirms their worst fears of corporate Japan’s resistance to outsiders and to change.