Olympus may sue directors over cover-up

Olympus is considering suing current and former members of its board over a Y100bn ($1.3bn) accounting scandal that has engulfed the optical equipment maker and shaken investor faith in Japanese corporate governance.

The 92-year-old company said on Sunday that it had received a report from a panel it set up last month to investigate directors’ responsibility for the scandal and was now “considering legal proceedings against current and former directors”.

Olympus said it would announce details of the panel’s conclusions and its legal plans on Tuesday, declining to comment on local media reports that Shuichi Takayama, the company’s president since October, plans to resign before the end of this month.

Kyodo, Japan’s leading news agency, reported on Sunday that the investigation panel had listed Mr Takayama as one of more than 10 people who bore responsibility for failing to prevent the scandal. The panel had advised Olympus to sue those identified as culpable for a total of more than Y90bn in damages.

Even if successful, legal action would be highly unlikely to result in the company receiving anything like such a sum, given that few Japanese directors are considered wealthy by the standards of Western business leaders.

Olympus itself faces a lawsuit from Michael Woodford, the former company president and chief executive who was fired in October after he raised questions about questionable transactions.

Olympus initially said Mr Woodford had been sacked for failing to understand Japanese management, but later admitted it had secretly shifted off its books more than Y100bn of investment-related losses via a complex scheme that lasted more than 13 years.

Although four top Olympus executives accused of organising the scheme have lost their jobs, Mr Takayama and others who approved Mr Woodford’s sacking as well as deals related to the loss-hiding remain in place.

Mr Woodford on Friday abandoned an effort to return to lead Olympus and to organise a new slate of directors, many from outside the company, to challenge incumbents at an extraordinary shareholders’ meeting this spring.

The Briton said his lawyers had filed legal papers in London seeking damages and the amount of salary that Olympus would have paid him over the remaining three years of his four-year contract.

The company still faces investigations by law enforcement agencies in Japan, the US and the UK, by regulators, and by the Tokyo Stock Exchange. But authorities have so far given little indication of how seriously they intend to pursue what has become one of Japan’s biggest corporate scandals in years.

The Yomiuri Shimbun, the nation’s biggest selling daily, said on Sunday that the TSE appeared likely to allow Olympus to retain its listing. Exchange executives were considering merely naming Olympus as a company requiring special attention and fining it Y10m for breaching its listing contract, the Yomiuri said.

Olympus avoided automatic delisting after meeting a December 14 deadline to restate its accounts, but could still be kicked off the exchange if the TSE decides the accounting deception had a material effect on shareholders.

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