Olympus admits it hid losses of $1.5bn for over 20 years

UNDER-fire camera and medical equipment maker Olympus yesterday admitted using a series of acquisitions to hide massive losses in a dramatic U-turn that vindicated its British ex-boss Michael Woodford.

The admission that the 92-year-old company had been hiding $1.5 billion (£940 million) of losses on securities investments dating back to the 1980s exposed one of the largest accounting frauds in Japanese history, sending its shares tumbling and throwing its future into doubt.

Tokyo-based Olympus hid the losses with a $687m payment for financial advice on the $2bn takeover of UK-based Gyrus Group in 2008 and expensive acquisitions of three Japanese companies with little or no relevance to its mainstay businesses.

The investment in the three domestic firms was largely written off a few months after the deals closed.

Woodford had claimed he was dismissed last month – just 14 days after he became chief executive – because he questioned the figures.

Since being fired on 14 October, ostensibly because he failed to understand the company’s management style and Japanese culture, Woodford has pressed for an inquiry. Yesterday he called on the board to resign and offered to return to Japan to lead the company if that’s what shareholders wanted.

Olympus had staunchly denied any wrongdoing until yesterday, although chairman Tsuyoshi Kikukawa resigned last month as the scandal grew.

The company said it discovered the cover-up while working with an independent panel set up last week to investigate the deals.

Shuichi Takayama, who took over as president late last month, blamed the previous leadership and said the company was considering legal action against them. Criminal charges could also be brought.

“We needed a higher level of corporate governance. From now on we’ll do our utmost not to make the same mistake again,” he said. He said he could not disclose the size of the losses or any other details because all data had been handed over to the independent panel.

The company dismissed executive vice-president Hisashi Mori, saying he had confessed to being involved in the cover-up, while an internal auditor resigned.

Olympus’ shares plunged 29 per cent as investors digested the possibility that the firm may be de-listed from the Tokyo Stock Exchange over the scandal. The company has now lost 70 per cent of its market value, or $6bn, since Woodford was sacked.

On Monday Edinburgh fund management firm Bailie Gifford, which holds more than 4 per cent of Olympus’ shares on behalf of clients, questioned the suitability of the company’s board.

Chief investment officer Gerald Smith said: “Olympus needs to make some immediate changes to its board structure to achieve effective board oversight, including the introduction of a majority of independent directors.

“These changes should be implemented without delay.”