Bloomberg News

Fired Olympus President Met U.K.’s Fraud Office on Report

October 18, 2011

(Updates drop in share value in third paragraph)

Oct. 18 (Bloomberg) -- Fired Olympus Corp. President Michael C. Woodford said he met with the U.K.’s Serious Fraud Office to request an investigation of payments made by the Japanese company to advisers in a 2008 acquisition.

Woodford handed the U.K. officials documents including a PricewaterhouseCoopers report that he commissioned, he said yesterday in an interview. He met with the SFO’s intelligence officers, who will decide whether to proceed with an investigation, a person familiar with the meeting said.

“I’m not saying fraud has taken place, I’m just making sure the authorities have all the documents because the payments were made from the U.K.,” Woodford said.

Olympus shareholders, including Nippon Life Insurance Co., have seen $3.8 billion in the market value of their investment wiped out in the three trading sessions after the board fired Woodford. Olympus may sue Woodford for leaking internal information to the press, Executive Vice President Hisashi Mori said in a conference call with investors and analysts yesterday, according to a research note by Takumi Kakazu, an analyst at a Tokyo-based unit of Morgan Stanley.

“I would be delighted for them to sue me in the High Court,” Woodford said yesterday in an interview on Bloomberg Television. He said there were a “lot of details still to come out.”

‘Wouldn’t Listen’

Olympus Chairman Tsuyoshi Kikukawa said at an Oct. 14 press conference that the board fired Woodford, a 30-year veteran of the Japanese company, because he “wouldn’t listen” to warnings from Kikukawa. The British executive said he was fired after he challenged the transactions.

Olympus, a maker of cameras and medical equipment, paid $687 million to two advisory companies related to its purchase of Gyrus Group Plc in 2008, the PwC report said. The fees were more than a third of the $2 billion purchase price, according to the report. Merger and acquisition advisory fees usually range from 1 percent to 5 percent.

“Olympus have to answer the question, Why pay $675 million in relation to an acquisition to unknown parties in the Cayman Islands?” Woodford said on Bloomberg TV. “The question still hasn’t been answered: for what and to whom?”

Woodford said that after being called to an unscheduled board meeting on Oct. 13 and not being allowed to speak, he was fired by the chairman.

Unknown Parties

Goldman Sachs Group Inc., Deutsche Bank AG and Nomura Securities Co. cut their stock ratings on Olympus amid concerns about the company’s corporate governance and costs. Cosmo Securities Co., which started coverage of Olympus last month, today withdrew its rating.

“We judged that the decision to fire Woodford had caused an important change in the reasoning for our investment stance,” Hiroshi Torii wrote in the Cosmos report.

Olympus shares plunged 8.9 percent to 1,417 yen as of the 3 p.m. close of trading in Tokyo today. The stock has fallen 43 percent since Friday, when the company fired Woodford.

Potential offenses by Olympus include false accounting and breaches of duties by the board, according to an Oct. 11 report by PwC that Woodford provided to Bloomberg News. Most of the payments were made through Olympus’s U.K. unit, Woodford said in the interview.

Olympus Corp. said all its corporate acquisitions and mergers have been conducted through “appropriate” accounting procedures, according to a statement released through the Tokyo Stock Exchange today.

“The eventual cost of the transaction to Olympus is extremely significant and is as a result of a number of actions taken by management which are questionable and which give cause for concern,” according to the PwC report. “We were unable to confirm that there has been improper conduct, however, given the sums of money involved and some of the unusual decisions that have been made it cannot be ruled out.”

--With assistance from Mariko Yasu and Peter Langan in Tokyo and Don Jeffrey and Lisa Murphy in New York. Editors: Peter Langan, Aaron Sheldrick

To contact the reporters on this story: Lindsay Fortado in London at lfortado@bloomberg.net; Chris Cooper in Tokyo at ccooper1@bloomberg.net

To contact the editor responsible for this story: Teo Chian Wei at cwteo@bloomberg.net


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