Bloomberg News

Olympus Held Undisclosed 18% Stake in Firm Linked to Cover-Up

December 14, 2011

Dec. 14 (Bloomberg) -- Olympus Corp. owned 18 percent of Axes Asset Management, an affiliate of the advisory firm accused of aiding the cover-up of losses at the camera maker, documents filed in 2007 with Japan’s Ministry of Finance show.

Olympus was the third-largest investor in Axes Asset Management, according to the March 19, 2007, document, obtained after a disclosure request made a month ago by Bloomberg News. While a 185-page report last week by an outside panel investigating Olympus’s accounts traced links to Axes bankers back to the 1980s, it made no mention of a financial tie-up.

Tokyo Stock Exchange has said it may delist Olympus over its admission that it falsified earnings statements for more than a decade to hide about $1.5 billion of losses. Olympus is trying to regain investor trust by saying that it has owned up to all financial wrongdoings and should remain publicly traded.

There was no detail of any financial transactions made by Axes Asset Management in the filing, and it is not known whether Olympus remains a shareholder. Parts of the three-page document, including details on four other stakeholders, were blacked out.

Tsuyoshi Kitada, a Tokyo-based spokesman for Olympus, wasn’t immediately available to comment last night. Axes Asset Management was merged into Axes Japan Securities on Jan. 1, 2010, according to another filing. A call made to Axes Japan, also last night, was unanswered.

The panel detailed the role played by Axes and other advisory firms in setting up a web of offshore vehicles and funneling takeover payments and fees back to Olympus to cancel out the losses.

Nakagawa, Sagawa

The filing also lists Akio Nakagawa, a banker linked to the fraud by the outside investigation panel. Nakagawa held 37 percent of Axes Asset Management, the document showed. Axes Japan was the second-biggest shareholder with 30 percent. The filing showed Nakagawa purchased his stake from Sagawa International Services Corp.

Sagawa International was a U.S. company owned by Hajime Sagawa, a U.S.-based Japanese banker who hasn’t made a public appearance since Michael Woodford exposed Axes’ role in the scandal after he was fired as Olympus’s chief executive officer on Oct. 14.

Sagawa and Nakagawa’s Axes America LLC was paid at least $24 million for helping Olympus disguise $670 million as advisory fees on the $2.1 billion takeover of U.K.-based Gyrus Group Plc. in 2008. Some of that money was paid out to other advisers, U.S. filings show.

Nakagawa worked at several securities firms, such as Merrill Lynch, Pierce, Fenner & Smith, Shearson Lehman Hutton Inc. and Drexel Burnham Lambert Inc. between the 1970s and 1990s, according to Financial Industry Regulatory Authority records in the U.S.

Cayman Islands

At least 17 Cayman Islands and British Virgin Islands special purpose companies were involved in the cover-up, according to the panel, which said payments were made through Commerzbank AG, Societe Generale SA and LGT Bank Ltd. Olympus’s payments to funds set up by another Japanese adviser, Nobumasa Yokoo, were also set out in the findings, which blamed the schemes on a “rotten” core of senior managers.

The 92-year-old company must file audited second-quarter financial statements by 5.15 p.m. today in Tokyo to avoid automatic delisting, according to TSE rules.

--With assistance from Teo Chian Wei in Tokyo. Editors: Ben Richardson, Peter Langan

To contact the reporters on this story: Yuki Yamaguchi in Tokyo at yyamaguchi10@bloomberg.net; Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Ben Richardson at brichardson8@bloomberg.net


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