Tech Biz

UK to Prosecute Olympus for Fraud

Olympus sees its share price take a tumble as a scandal resurfaces.

Britain’s Serious Fraud Office (SFO) will seek fraud charges against Olympus, in a continuation of the 2011 scandal that saw executives from the disgraced Japanese electronics company cover up $1.7 billion in company losses. The company’s then chief executive, Michael Woodford, was fired by his Japanese colleagues after challenging former chairman Tsuyoshi Kikukawa to explain suspicious accounting practices.

Tokyo’s District Court found Kikukawa and two other executives guilty of violating securities laws and falsifying financial statements on this July 3. Kikukawa was sentenced to three years in prison, but was handed a suspended sentence that spared him from serving jail time. The others, an auditor and another executive-level employee, were given suspended two-and-a-half year sentences. Olympus was also ordered to pay 700 million yen ($7 million) in fines. British authorities were unimpressed with the Tokyo court’s leniency.

Although Olympus shares plummeted after the fraud allegations came to light, company stock has risen to pre-scandal levels – posting an $8 billion net profit in fiscal 2012. The SFO’s decision to prosecute has caused Olympus stock to fall once again.

“The company's shares slid as much as 6.3 percent on Wednesday after the company said the SFO would prosecute Olympus and [UK subsidiary] Gyrus Group Limited for a suspected breach of the UK Companies Act of 2006 by falsifying financial accounts in fiscal 2009 and 2010,” said Reuters.

Reuters continued: “Olympus said this would mark the first time the SFO had decided to prosecute a company, rather than an individual, for fraud, and that the lack of precedent made it unclear how long proceedings may take or what level of fines may be imposed.”

Olmypus purchased Gyrus, a UK-based medical equipment firm, in 2008. The $2 billion acquisition was written down by Olympus in a move to cover up losses that dated back as far as a decade.

Court proceedings are expected to take place this month. An Olympus spokesperson added that the company remains under the scrutiny of the U.S. Department of Justice, as well.