Olympus president Shuichi Takayama bows his head at a press conference in Tokyo on  Wednesday.

Story highlights

NEW: Olympus board will appoint a panel to decide on legal action against ex-executives

An independent panel report said Olympus Corp. "should remove its malignant cancer"

The panel detailed $1.7 billion of hidden losses from failed investments in the 1990s

Report: "The management was rotten to the core, and infected those around it"

CNN  — 

The scandal-hit Olympus Corp. will appoint a board to decide whether the Japanese company should take legal action and file criminal complaints against executives who helped hide $1.7 billion in losses, the company president said Wednesday.

The comments from Olympus President Shuichi Takayama come a day after the findings of a scathing independent panel report that suggested the Japanese company “should remove its malignant cancer.

“The management was rotten to the core, and infected those around it,” the panel’s report said.

The panel, led by a former Japanese Supreme Court judge, detailed $1.7 billion of hidden losses from failed investments in the 1990s by the camera and medical equipment maker. The report, issued Tuesday, blasted the culture of the company that allowed the losses to be disguised in dubious fees and overvalued payments for companies, as well as the tight control of former company Chairman Tsuyoshi Kikukawa.

Olympus has lost half its share value in the wake of the October 14 firing of former CEO Michael Woodford, the first foreigner to lead the company, after Woodford questioned the company’s accounting. After Woodford went public with his claims, the company’s share value dropped by as much as 75%. Three former executives, including Kikukawa, have since resigned from the company’s management.

“One had to be prepared to be kicked out of the company in order to make objection even if it was the right thing to do (this is also apparent in how Woodford was treated),” the panel wrote in its report.

The panel reiterated its earlier announcement that their investigation found no link to “anti-social forces,” a euphemism to Japanese organized crime.

Company officials said in a statement that the report “includes both new revelations and recommendations on the future management of Olympus (and) will be taken into serious consideration by the company.”

The independent panel recommended the resignation of the entire Olympus board. Takayama said at Wednesday’s press conference that he and the board will resign but not until the “exact responsibilities” of wrongdoing are revealed by investigators. Resignations and changes to company management would likely come after a shareholder’s meeting sometime in February.

The company faces a December 14 deadline to resubmit its financial statement to the Tokyo Stock Exchange or face delisting. Company officials have repeatedly said they will turn in the required documents before next week’s deadline.

The Olympus saga started with a five-page expose in Japanese magazine FACTA – a small circulation magazine that has only nine people on staff – on July 20 that raised questions over advisory fees of $687 million paid in 2008 for the purchase of Gyrus, a UK medical instruments firm. The article also questioned the $773 million paid for three small Japanese companies – a face cream maker, a plastic container maker and a recycling business, each with fewer than 50 employees.

Woodford has led a public campaign since his dismissal to get rid of the company board, and has said he would return to run the company if asked.

“The panel’s report has made one thing painfully clear: the massive scale of the malfeasance from which the present directors and statutory auditors persistently averted their gaze,” Woodford said in a statement. “I sought to call attention to the wrongdoing through a series of six letters in English and Japanese, copied to all the members of the board, and through the submission of a damning report by Price Waterhouse Coopers. Yet not a single director stood up in support of my efforts to expose what had taken place.”

Takayama said the board will decide whether to bring Woodford back at the next shareholders meeting. “Woodford did what we all couldn’t do, so we praise him for that,” Takayama said.

Freelance producer Nicolas Ito contributed to this report