Olympus dismisses exec VP, admits hiding losses
posted Tuesday, November 8, 2011 at 3:23 PM EST
A fortnight ago, we reported on a developing story at Olympus Corp., parent company of Olympus America Inc., where newly-appointed president and chief executive officer Michael C. Woodford had been abruptly dismissed from both positions, just a fortnight after assuming the latter role.
Company chairman Tsuyoshi Kikukawa briefly resumed both roles before stepping down himself, while still denying wrongdoing in the 2008 acquisitions of British medical equipment manufacturer Gyrus Group plc and three little-known Japanese companies. Since our earlier story, Olympus Corp. has now issued admitted that the company had for decades hidden losses sustained on investment securities around the 1990s. The official statement--which can be seen at the end of this article--further disclosed that the company had in part used the record-breaking fees from the Gyrus purchase, as well as funds from the acquisition of the Japanese companies, in an attempt to erase these earlier losses.
In a separate statement, Olympus revealed that Executive Vice President Hisashi Mori--who joined the company in April 1981--had likewise been dismissed, although as with Woodford and Kikukawa before him, he remains a non-representative company director. In addition, Standing Corporate Auditor Hideo Yamada is said by Olympus to have expressed an intention to offer his resignation.
At a press conference in Tokyo earlier today, Olympus' President Shuichi Takayama reportedly described a meeting with Mori the previous night, at which he claimed he was first told of the losses, and of the long-term coverup. While denying any personal involvement, Takayama pledged that Olympus would continue to provide information to a third-party investigation panel appointed by the company, in an attempt to reveal the full story.
The affair continues to have a dramatic effect on the company's share price. From the day before Woodford was dismissed, Olympus' shares had plunged by more than two thirds when trading began this morning. Southeastern Asset Management--the company's largest overseas shareholder, with a five percent holding--is reportedly calling for an extraordinary general shareholder meeting, where principal Josh Shores intends to call for the company's entire board to be removed.
Effects have been felt outside the company, as well. Shares in Nomura Holdings, Olympus' main broker since 1998, fell to their lowest levels in almost four decades on speculation of involvement in the case, although the company issued a swift denial. Authorities in Japan, the UK and the US are all said to be investigating Olympus' actions, although they have yet to make any official statements on the case. Ex-CEO Woodford, meanwhile, continues to suggest that he believes further revelations will be forthcoming in the affair.
Press Release
Notice Concerning Past Activities Regarding Deferral in Posting of Losses
Company: Olympus Corporation
Representative Director, President and CEO: Shuichi Takayama
(Code: 7733, First Section, Tokyo Stock Exchange)
Contact: Akihiro Nambu, Manager, Public Relations and IR Office
November 8, 2011 -- As released in "Notice Concerning the Establishment of a Third Party Committee" on November 1, 2011, Olympus Corporation (the "Company") is currently providing its full cooperation, including the provision of information, to the investigations being conducted by the Third Party Committee in establishing the truth of certain facts regarding the Company's previous acquisition transactions. The Company hereby announces that, during this process, it has been discovered that the Company had been engaging in deferring the posting of losses on investment securities, etc. since around the 1990s, and that both the fees paid to advisors and funds used to buy back preferred stock in relation to the Gyrus Group PLC acquisition, as well as the purchase funds for the acquisition of the three domestic new business companies (Altis Co., Ltd, NEWS CHEF, Inc. and Humalabo Co, Ltd.) had been, by means such as going through multiple funds, used in part to resolve unrealized losses on investment securities, etc. by such deferral in the posting of these losses.
The Company will continue its utmost effort to establish the truth of the case by the thorough provision of all information to the Third Party Committee (Chairman: Tatsuo Kainaka, attorney-at-law). The Company shall also immediately disclose any further important information which has come to light.
The Company would like to take this opportunity to sincerely offer our deepest apologies to its shareholders, investors, trading partners and other relevant parties for all inconvenience caused.
- END -
Notice Concerning Expansion to Scope of Investigation by the Third Party Committee and Personnel Change
Company: Olympus Corporation
Representative Director, President and CEO: Shuichi Takayama
(Code: 7733, First Section, Tokyo Stock Exchange)
Contact: Akihiro Nambu, Manager, Public Relations and IR Office
November 8, 2011 -- As already announced in the "Notice Concerning Past Activities Regarding Deferral in Posting of Losses" disclosed earlier today, Olympus Corporation ("the Company") discovered that it had been engaging in deferring the posting of losses on investment securities, etc. since around the 1990s, and that a series of fees, including acquisition funds, had been used to resolve such deferral in the posting of these losses.
In consideration of the situation, the Company has requested the Third Party Committee to include explicitly in its scope of investigation the facts regarding the deferral in posting of the losses. In addition, during the Company's Board of Directors meeting held earlier today, the Board voted to dismiss the Director and Executive Vice President of the Company, Hisashi Mori, who was found to be involved in such deferral in posting of the losses, from his position of Executive Vice President with immediate effect. Further, the Company would also like to announce that the Standing Corporate Auditor of the Company, Hideo Yamada, who was also involved in this matter, has expressed his intention to offer his resignation.
The Company will continue its utmost effort to establish the truth of the case by the thorough provision of all information to the Third Party Committee. The Company shall also immediately disclose any further important information which has come to light.
The Company would like to take this opportunity to sincerely offer our deepest apologies to its shareholders, investors, trading partners and other relevant parties for all inconvenience caused.
- END -