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Olympus and former executives charged over accounting scandal

Japanese prosecutors said on Wednesday it had brought charges against three former senior executives of Olympus for falsifying the company’s financial statements in an attempt to cover up huge investment losses dating back 20 years. The company — as a corporate identity — faced the same charge, as did three financial advisers.

If convicted, former chairman Tsuyoshi Kikukawa, former executive vice president Hisashi Mori and former auditing officer Hideo Yamada could be handed prison terms or hefty fines.

According to an AFP report, Tokyo district prosecutors said that all six had taken part in the cover-up, which involved trying to shift $1.7 billion worth of losses from the company’s balance sheet.

The Tokyo Stock Exchange stated that even though criminal charges had been brought against the company and some of its former executives, it did not necessarily mean Olympus would be expelled from the exchange.

The Japanese camera and medical equipment maker has been in turmoil ever since ousting Michael Woodford from his position as CEO back in October after just two weeks in the job. Following his removal, it transpired that Woodford had been questioning the Olympus board about inflated takeover payments made in the preceding years. Those involved in the scandal, realizing they were in deep trouble, appeared to think they could silence the matter by ousting Woodford.

However, before the year was out, some of those at the top of Olympus admitted they had been using merger and acquisition deals to cover up losses going back to the early 1990s.

Investigators raided Olympus’s Tokyo headquarters in December and last month a number of arrests were made, culminating in today’s charges being brought by Japanese prosecutors.

Olympus’s market value has fallen almost 50 percent since October as the company scrambles to restore its badly tarnished reputation.

However, according to Ichiyoshi Investment Management’s Mitsushige Akino, today’s events could spell further trouble. “The company’s indictment could lead to more concerns that the fraud was organizational,” Akino told Bloomberg. “Investors won’t be wanting to buy a stock like this.”

Olympus put out a short statement (pdf) following news of the charges. “The company takes the prosecution by the Tokyo District Public Prosecutors’ Office with utmost seriousness and will continue to make every endeavor to enhance the corporate governance systems,” it said.

[Source: Bloomberg / AFP] [Image: Pixelbart]