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(Updates with share gains in second paragraph.)
Jan. 10 (Bloomberg) -- Olympus Corp. said it is seeking damages from its president, Shuichi Takayama, and 18 other current and former executives over their roles in a $1.7 billion cover-up of losses.
The Japanese camera maker’s auditors filed the claims at the Tokyo District Court on Jan. 8, Olympus said in a statement today. The company’s shares surged as much as 28 percent on investor optimism that it would keep its listing on the Tokyo Stock Exchange that had been under threat because of the fraud.
Olympus managers involved in the scheme to hide investment losses over more than a decade caused 86 billion yen ($1.1 billion) in damages to the company, according to the findings of an independent panel released today. Former President Michael Woodford, who was fired after he challenged the board on takeover and accounting practices, is also taking legal action against the company over his dismissal.
“It’s all part of the natural fallout to be expected with each party trying to stake their positions and to protect their legal interests,” Eugene Tan, assistant professor of law at the Singapore Management University, said yesterday following Japanese media reports that the lawsuits had been filed. “We’ll see suits and countersuits taking place in the next couple of weeks, if not months.”
Olympus climbed 21 percent to 1,275 yen as of 9:46 a.m. in Tokyo trading. The stock has lost about 49 percent of its value since Woodford’s Oct. 14 firing as details of the fraud emerged and the Tokyo Stock Exchange put the 92-year-old company on a watchlist for possible delisting.
The bourse is likely to let the company retain its listing and will fine it 10 million yen instead, the Nikkei reported yesterday. The TSE today said no final decision has been made.
The company is seeking as much as 3.6 billion yen ($46.8 million) in damages from executives including ex-Chairman Tsuyoshi Kikukawa, it said. Takayama, who took over after Woodford, is being sued for as much as 500 million yen, the company said in a statement today.
Former company auditor, Hideo Yamada, and Hisashi Mori, fired as executive director over his role, are being sued for 3.01 billion yen and 2.81 billion yen, respectively, it said.
Olympus spokesmen weren’t immediately available to comment, and repeated attempts since the scandal broke to contact officials involved, including visits to their homes, have failed.
Directors to Quit
The company last week said it may hold an emergency shareholder meeting as early as March at which current board members, including Takayama, will resign and investors will vote on new management.
The company inflated fees to advisers on the $2.1 billion acquisition of Gyrus Group Plc in 2008 and overpaid in purchasing three Japanese companies with the intention of increasing goodwill, the independent panel investigating the fraud said last month.
The report said it found a culture of “yes men” and a board that failed in its duty to stop a “rotten” core of executives from duping auditors, regulators and investors.
Woodford filed a case in the U.K. last week seeking damages for the remainder of his four-year contract and additional costs. Before being named as Olympus’s first non-Japanese president and chief executive officer last year, the British national ran the company’s European operations, where he won praise from analysts for cutting costs and improving profitability. Woodford last week said he may also sue in Japan.
The 51-year-old former CEO also abandoned efforts to regain control of Olympus after failing to gain support from Japanese shareholders.
Olympus’s biggest shareholder, Sumitomo Mitsui Financial Group Inc., said after Japanese prosecutors raided the camera- maker’s offices that it would maintain support for the company. Southeastern Asset Management Inc., the company’s biggest overseas stockholder, and Harris Associates LP have said the entire board and all executives involved in the fraud must go.
The company “continues to suffer under shoddy corporate governance and an utterly discredited board,” Josh Shores, a London-based principal at Southeastern Asset, said in a Jan. 6 statement. “We maintain that the board should be replaced and a new board should oversee the company’s revival.”
$5 Billion Slide
Olympus admitted in November that Kikukawa, Mori and Yamada, a former company auditor, colluded to hide losses on securities investments in the 1990s.
The company has lost about $5 billion of market capitalization since firing Woodford and was forced to restate more than five years of earnings last month to avoid an automatic delisting after admitting to the 13-year cover-up.
Olympus’s net assets fell by 105 billion yen to 46 billion yen after the restatement.
The company, also the world’s largest maker of endoscopes, faces criminal probes in the U.S. and U.K., as well as Japan, since Woodford made the takeover payments public in October.
--With assistance from Yoshinori Eki, Komaki Ito and Monami Yui in Tokyo, Andrea Tan in Singapore and Douglas Wong in Hong Kong. Editors: Ben Richardson, Dave McCombs
To contact the reporters on this story: Chris Cooper in Tokyo at firstname.lastname@example.org; Shunichi Ozasa in Tokyo at email@example.com
To contact the editor responsible for this story: Neil Denslow at firstname.lastname@example.org