Olympus used takeover fees to hide losses

Olympus, the Japanese camera maker, has for the first time acknowledged wrongdoing in a scandal involving more than $1bn in acquisition-related payments questioned by its former chief executive, saying the money had been used secretly to cover losses on investments dating to the 1990s.

The company had defended the payments – including a $687m advisory fee paid in its 2008 acquisition of the UK medical equipment company Gyrus – since they were revealed more than three weeks ago by the former chief executive, Michael Woodford.

Olympus fired Mr Woodford on Oct 14 after he pressed fellow board members for information on the deals, which were made under his predecessor.

“It has become clear that advisory fees and funds used to buy back preferred shares in the Gyrus acquisition, as well as funds used in the purchase of three new domestic businesses … were used, among other things, to dispose of unrealised losses on securities, the reporting of which had been put off,” Olympus said in a statement on Tuesday.

It did not identify the lossmaking investments, saying only that “since the 1990s, our company has been putting off booking losses on securities investments”.

Olympus said on Tuesday that it had dismissed Hisashi Mori, executive vice president, for his involvement in hiding the investment losses.

Mr Woodford said that the company’s board should resign, telling Reuters in a telephone interview that its position has become “untenable”.

Olympus is to hold a news conference at 12:30pm in Tokyo. Its shares, which had already lost half their value since the payments came to light, were down a further 29 per cent in morning trading.

The company last week appointed a committee of outside legal experts, including a former supreme court justice, to examine the acquisitions. Olympus’ statement on Tuesday said the true nature of the payments had emerged in the process of preparing materials for the committee.