Tokyo - Japanese camera and medical equipment maker Olympus and
three of its former executives pleaded guilty on Tuesday over charges related
to a $1.7bn accounting cover-up in one of Japan’s biggest corporate scandals.
The scandal was exposed last October by chief executive
Michael Woodford, who was sacked by the Olympus board after querying dubious
deals later found to have been used to conceal the losses.
Revelations of the huge accounting fraud revived calls for
more outside scrutiny of its boardrooms but have failed to trigger sweeping
corporate governance reforms similar to those introduced a decade ago in the
wake of US scandals such as at Enron.
“The full responsibility lies with me and I feel deeply
sorry for causing trouble to our business partners, shareholders and the wider
public,” ex-chairperson Tsuyoshi Kikukawa told the Tokyo district court at the
start of the trial nearly a year after the cover-up first came to light.
“I take full responsibility for what happened.”
Prosecutors charged Kikukawa, former executive
vice-president Hisashi Mori and former auditor Hideo Yamada with inflating the
company’s net worth in financial statements for five fiscal years to March
The three former executives had been identified by an
investigative panel, commissioned by Olympus, as the main suspects in the fraud
seeking to delay the reckoning from risky investments made in the late-1980s
The indictment did not specify what penalties the prosecutors
would seek, but lawyers have said the former executives could face up to 10
years in jail and fines of up to ¥10m. The company could be fined more than
¥100m, according to the Japanese media.
What if any impact the company’s guilty plea will have on
Olympus will depend on what sentence, including a possible fine, the court
hands down, said Tsuyoshi Oshima, a spokesperson for the medical equipment
maker. That decision, he said could be several months away.
“Lawsuits from shareholders are possible,” Oshima said. The
drop in Olympus’s share price has already spurred 12 lawsuits, including 11 in
Japan, he said.
Woodford had campaigned to win his job back, but has since
given up, blaming cosy ties between management and big Japanese shareholders
and citing the strain on his family.
Olympus has already admitted it used improper accounting to
conceal massive investment losses under a scheme that began in the 1990s.
In December, it filed five years’ worth of corrected
financial statements plus overdue first-half results, revealing a $1.1bn dent
in its balance sheet.
With its share price hit by the scandal and a hole blown in
its finances, the company has been struggling to secure funds to cover its
losses, triggering talk it would need to merge or forge a business tie-up to
On Tuesday, three sources familiar with the deal said rival
electronics and entertainment giant Sony was likely to approve a plan this week
to invest ¥50bn in Olympus, becoming its biggest shareholder with around a 10%.
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