Bloomberg News

Cops Watch Woodford’s Back at Olympus Scandal Briefings

November 24, 2011

(Updates with Woodford’s comments in sixth paragraph)

Nov. 24 (Bloomberg) -- Olympus Corp. former President Michael C. Woodford was tailed by two police vans today as he took taxis through Tokyo to brief investigators probing the camera maker’s admission it covered up investment losses.

Woodford arrived in Japan yesterday for the first time since his dismissal on Oct. 14, when he left the country saying he felt unsafe following reports in the Japanese-language Facta magazine that payments made by Olympus in takeovers may be linked to organized crime groups. At least $1.4 billion in acquisition costs are now at the center of criminal probes.

Whether it’s organized crime or just criminality, “we need to establish ‘did we?’ and if we have, we need to take necessary action to remove ourselves,” Woodford said in an interview with Bloomberg Television in Tokyo today.

In 1993, the deputy president of Hanwa Bank Ltd. was shot dead in front of his home, followed by the murders of a manager at the former Fuji Photo Film Co. and a branch manager at then Sumitomo Bank Ltd. Those professional killings spawned media speculation about connections to organized crime.

Japanese investigators are looking at whether Olympus worked with organized criminals in transferring the funds, the New York Times reported, citing a memo from law-enforcement officials.

Woodford said he’s confident Japanese prosecutors will fully investigate Olympus. “I’m very happy with how things went,” he told reporters after visiting police in Tokyo.

Blowing Whistle

Shares of the 92-year-old camera and endoscope maker have slumped 59 percent since Woodford was fired, on concerns about the scale of the losses, the threat of delisting and continuing criminal investigations. Tokyo-based Olympus has more than doubled since Nov. 11, as investors bet the problems would be contained. The stock surged 17 percent in Tokyo trading today.

Woodford went public with queries he raised with former Chairman Tsuyoshi Kikukawa and ex-Executive Vice President Hisashi Mori over $687 million paid in advisory fees in the $2.1 billion acquisition of U.K. medical company Gyrus Group Plc, as well as writedowns of stakes in three other takeovers.

Olympus said the money may have been rerouted to the company via offshore funds to help cancel out losses on securities investments dating back to the 1990s.

An independent committee set up by Olympus to investigate its accounting said this week that it found no evidence of criminal involvement. Woodford said it wasn’t possible to reach that conclusion without a forensic inspection of accounts.

Board Showdown

Olympus called a board meeting Nov. 25, setting up a showdown between its first foreign president and directors who cited his management style when they unanimously voted to dismiss him. Since then, the company has admitted Kikukawa and senior aides colluded to cover up losses.

Kikukawa and Woodford both remain on the board, along with company auditor Hideo Yamada, who offered to step down over the scandal, and Mori, who was fired. None of them have made public statements since newly installed President Shuichi Takayama said Nov. 8 that the three were involved in covering up losses.

Former Daio Paper Corp. Chairman Mototaka Ikawa was arrested for alleged aggravated breach of trust on Nov. 22. He borrowed 10.7 billion yen ($139 million) from the company’s seven subsidiaries for “personal use,” as he tried to cover losses from currency trading, Daio said last month.

Ikawa, grandson of the papermaker’s founder, used most money borrowed from group companies to gamble at casinos, the Yomiuri newspaper reported this week, citing an apology letter distributed by his lawyer.

--With assistance from Chris Cooper, Mariko Yasu and Mike Firn in Tokyo. Editors: Ben Richardson, Lena Lee

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Julie Masuda in Tokyo at jmasuda@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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