Authorities in Japan have made seven arrests in the massive accounting scandal that has rocked camera and medical-gear maker Olympus. Among those taken into custody are Olympus’s former chairman and president Tsuyoshi Kikukawa, former executive vice president Hirashi Mori, and former auditor Hideo Yamada on suspicion of having falsified the company’s financial statements. Authorities also arrested two investment bankers and two banker associates accused of having helped set up and maintain the cover-up.
Olympus’ scandal erupted last October with the company’s recently-installed CEO Michael Woodford was summarily fired for questioning the finances surrounding Olympus’s acquisition of UK medical gear maker Gyrus. The now-arrested former chairman Kikukawa claimed Woodford was fired because his management style clashed with Olympus’s culture, but Woodford went public with his accusations, eventually leading to the resignation of several board members and an internal investigation that revealed Olympus had been covering up investment losses for more than a decade. Olympus has managed to avoid having its stock de-listed from the Tokyo stock exchange, although Woodford gave up on his bid to be re-instated as the company CEO. Olympus is currently working on a plan to salvage its business—possibly in partnership with Sony, Fujifilm, Panasonic, or another major Japanese electronics manufacturer.
Earlier this week, Olympus forecast it will lose $410 million in its current fiscal year (PDF) ending in March. So far, the company has restated five years worth of previous earnings, revealing a shortfall of $1.1 billion. An “extraordinary” shareholder’s meeting is scheduled for April to establish the membership of the company’s board and lay out the company’s plans for recovery.
The company”s current president, Shuichi Takayama, has indicated the firm believes its core medical equipment business is sound—Olympus is the world leader in endoscopes—and the company may not need to seek outside investment to regain its footing. There has been no word on the future of Olympus’s consumer-oriented camera business, although speculation has centered on Olympus selling the business or possible working out an investment deal—Sony’s incoming CEO Kazuo Hirai as indicated he’s interested in increasing Sony’s participation in the medical industry.