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Board members in Olympus cover-up resign

By Kevin Voigt, CNN
updated 4:41 AM EST, Fri November 25, 2011
Former Olympus president Michael Woodford arrives at a seminar in Tokyo on November 24.
Former Olympus president Michael Woodford arrives at a seminar in Tokyo on November 24.
  • Shares of scandal-plagued Olympus rallied after three board members quit
  • Chairman Tsuyoshi Kikukawa, Vice President Hisashi Mori and Auditor Hideo Yamada quit
  • Ousted CEO turned whistleblower Michael Woodford met with Japanese police
  • Investigation centers on $1.4 billion in losses the company claimed as transaction fees

(CNN) -- Shares of scandal-plagued Olympus rallied after three board members of the Japanese camera maker quit ahead of today's meeting with a company ex-CEO turned whistleblower.

Shares soared as much as 25% in early trade Friday after former Chairman Tsuyoshi Kikukawa, former executive Vice President Hisashi Mori and Auditor Hideo Yamada quit. The company claims the trio helped fake payments for merger transactions to cover $1.4 billion in losses.

The resignations are the latest in a series of incidents in a scandal that began on October 14 with the firing of Michael Woodford as chief executive, who subsequently went public with allegations the Olympus management team and board had covered up hundreds of millions of losses in bad investments dating back to the 1990s.

A subsequent probe that looked into the shady M&A transactions, including whether there was Japanese mob involvement, have pummeled shares of the camera and medical equipment maker. The share value has dropped more than 80% in the past six weeks. The company faces the threat of de-listing from the Tokyo Stock Exchange for inaccurate financial statements.

Ex-Olympus CEO to face prosecutors
Ex-CEO addresses Olympus controversy
Olympus issues an apology of sorts

Woodford was back in Tokyo on Thursday, where he met with Japanese prosecutors. This morning he met with the Olympus board that fired him last month. Woodford said the board meeting was "constructive."

Woodford claims he was fired because he asked about the $1.4 billion in questionable transaction fees.

"In Japanese life, it's wonderful to be harmonious on the personal level with your friends and family, but in a corporation you need agitation, you need challenge, you need questioning," Woodford told reporters Thursday. "And if that's not good for Japan, then I'm very sad."

The murky merger and acquisition fees includes a $687 million transaction fee that represented about one-third of the cost of the acquisition, which would make it the largest percentage transaction fee in global merger and acquisition history.

Earlier this week, a third party probe said it found no evidence that funds flowed from Olympus into organized crime, responding to a New York Times report that investigators are looking into whether missing cash went into companies linked with Japanese yakuza, or mobs.

There is speculation that Woodford, who remains a director on the Olympus board, will be asked back as CEO. Woodford has said he would like to return to the company.

If Woodford returns "he would have a big target on his back ... but right now we don't see any viable alternative," Ben Collett, head of Japan Equities for Louis Capital Markets, told CNN. "So I think it's about an 80% certainty that he will (return). But his ability to change the business from inside now I think is going to be somewhat comprised by that fact that: A) he is a foreigner, and B) he's the person who basically brought down the established management."

The company must provide revised financial information to the Tokyo Stock Exchange by December 14 or risk being de-listed.

The company's stock listing plummeted form 2,282 yen on October 13 down to a low of 460 yen on November 11. The stock has see-sawed since then but was trading at 1,230 yen early Friday morning.

CNN's Ramy Inocencio and Junko Ogura contributed to this report

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