Updated: Includes lawyer comments and expanded background
(Reuters) — Britain’s Serious Fraud Office (SFO) on Tuesday scrapped a two-year prosecution of Olympus Corp stemming from a $1.7 billion accounting scandal that centered on the Japanese endoscope maker’s acquisition of a British company in 2008.
Olympus’s board resigned and three former executives and the company itself pleaded guilty to charges relating to a cover-up after former British CEO Michael Woodford alerted prosecutors and the media worldwide in 2011 to a series of unexplained payments after being fired for questioning company accounts.
But the SFO struggled to bring a British prosecution in a case that was not allowed to be reported for legal reasons until Tuesday.
In 2013, the prosecutor charged Olympus and its British medical equipment subsidiary Gyrus with misleading an auditor. But in a blow to the agency, London’s Court of Appeal ruled in February that that was not a criminal offence under English law.
The SFO, which said it was also unable to prosecute individuals because Japan does not extradite its nationals, decided on Tuesday against presenting evidence in the case. One lawyer called the decision “inevitable”.
Under director David Green, the SFO has been keen to bring more companies to book and restore faith in an agency which is dogged by speculation about its imminent demise.
While previous high-profile prosecutions have collapsed – such as the corruption trial of British Canadian businessman Victor Dahdaleh in 2013 – the agency has also had some notable recent successes.
These include the conviction in August of Tom Hayes, the first man jailed worldwide after a global investigation into allegations of Libor interest rate rigging – although critics note that Hayes handed the agency much of its case on a plate when he initially offered investigators his full cooperation.
Olympus bought Gyrus for $2 billion in 2008, paying the world’s largest advisory fee – equivalent to one-third of the purchase price – and later writing down the value of the deal along with a handful of other acquisitions.
The deal, however, was part of a scheme to cover up years of investment losses, executives later admitted.
Sony Corp bought an 11.5 percent stake in Olympus in 2012 in a much-needed cash injection. But it halved its stake in April to finance a restructuring.