Olympus Remains at Risk of Delisting After Report, Exchange Says

December 06, 2011, 5:14 AM EST By Mariko Yasu

Dec. 6 (Bloomberg) -- Olympus Corp. risks being delisted even if it makes a Dec. 14 deadline to announce earnings, the Tokyo Stock Exchange said after the release of an independent report into false accounting by the Japanese camera maker.

Senior management was “rotten to the core” and corrupted other layers of executives that touched it, according to the report of a panel probing Olympus’s schemes to cover up 117 billion yen ($1.5 billion) in losses dating back decades. The cost of the losses increased to 135 billion yen because of fees paid to advisers on the transactions, it said.

The TSE’s statement may undermine a rebound in Olympus shares since the company first admitted on Nov. 8 to using inflated takeover costs and advisory fees to hide investment losses dating back decades. Investigators in Japan, the U.S. and U.K. are still probing the transactions amid allegations kickbacks may have gone to organized crime.

The panel said it found no evidence that money was funneled to anti-social forces, a byword for criminal gangs. Masatoshi Kishimoto, 75, who was the president for eight years since 1993 and his successor Tsuyoshi Kikukawa were among former executives at the Tokyo-based company involved in the cover-up, according to the report.

The 26-page summary of a larger report stopped short of calling for a wholesale change in management at the company, saying that the conspiracy was restricted to a small circle and wasn’t systemic.

Woodford

The report came seven weeks after dismissal of former chief executive officer Michael C. Woodford who questioned $1.4 billion in takeover costs, including fees paid to a now-defunct Cayman Islands fund in the $2.1 billion takeover of Gyrus Group Plc in 2008. The 51-year-old British citizen resigned as a director Dec. 1 in the first step of a campaign to take control of the company from the board that fired him Oct. 14.

Shareholders should be given a chance to vote for new management after Olympus admitted Kikukawa and senior aides colluded to cover up losses dating back to the 1990s, Woodford said last week. Southeastern Asset Management Inc., Olympus’s largest overseas stockholder, joined Woodford in calls for a change of management.

Olympus shares, which declined to their lowest in 36 years on Nov. 11, rose 9.1 percent as of the close of trading in Tokyo, before the panel’s report today. The stock has declined 52 percent since the dismissal of Woodford.

The company began making financial investments after 1985 as a strong yen hurt operating profit, the panel said. When Japan’s stock market bubble burst at the end of 1989, the company purchased high-risk products and structured bonds in an effort to recoup the loss. In late 1990, the company had a little less than 100 billion yen of unrealized loss.

Olympus is “cooperating fully with investigators” such as the Tokyo District Public Prosecutors Office, the Tokyo Metropolitan Police and Japan’s Securities and Exchange Surveillance Commission, spokesman Tsuyoshi Kitada said Dec. 5, declining to elaborate further.

--With assistance from Ben Richardson in Hong Kong and Takahiko Hyuga in Tokyo. Editors: Ben Richardson, Dave McCombs

To contact the reporter on this story: 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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