Olympus admitted today to hiding loses from its investors with acquisitions over two decades, and now the company’s largest shareholder outside of Japan is demanding the resignation of the entire board of directors.
In a press conference in Tokyo Tuesday, Olympus President Shuichi Takayama admitted to the fraud saying, “We have conducted extremely improper accounting.”
Takayama denied any previous knowledge of the coverup, and placed the blame on Chairman Tsuyoshi Kikukawa, who has resigned, Executive Vice President Hisashi Mori, who was fired, and auditor Hideo Yamada, who has said he will step down. All three men, and any Olympus employee who has taken part in hiding losses since 1990s, could face criminal charges. The company itself could face stock delisting from the Tokyo Stock Exchange.
The accounting scandal has rocked the 92-year-old camera and endoscope company, and Olympus shares have plunged 70 percent since the accusations were made public last month.
The revelations came to light when CEO Michael C. Woodford was fired on October 14 after 30 years with the company and only six months as CEO. Woodford accused the Olympus board of making questionable payments of more than $1.5 billion to investment fund advisers under the previous Chairman, Tsuyosji Kikukawa. He said the money was funneled through suspect companies in the Cayman Islands Islands that have since disappeared from the trade register, and that the attempt to hide losses has cost investors $1.3 billion.
The overseas investor demanding heads is Southeastern Asset Management, which owns around five percent of Olympus’ stock. In a statement, the company called for multiple resignations and asked for a general meeting of shareholders: “We request that an extraordinary general meeting of shareholders is called to allow the remaining members of the board of directors and the board of corporate auditors to be replaced as soon as practical.”
In Japan, the illegal practice of hiding losses by investing in dummy companies is a known as a Tobashi scheme. The securities trading firm Yamaichi Securities Co. famously went under in 1997 after attempting to hide over $2 billion in losses this way.
Olympus is now being investigated by the Japanese Securities and Exchange Surveillance Commission and the U.S. Securities and Exchange Commission.