Olympus Corp. (TYO:7733) may have hidden as much as $5 billion in losses through activities that may link them to organized crime, new police memos suggest.
Japanese officials are probing the company for evidence that it paid criminal syndicates large sums of money to help it hide heavy losses, according to a document obtained by the New York Times.
The new estimates dwarf the Tokyo-based technology giant’s revelation earlier this month that nearly $1.5 billion in possibly illegal merger and acquisition fees were used to conceal heavy losses on investments over the last 20 years
The company issued a very brief press release earlier this week stating that a third-party probe so far has uncovered no evidence of involvement with organized crime syndicates. Olympus appointed the committee, led by a former Japanese Supreme Court justice, to investigate the record-setting fees.
Amid the turmoil, former president Michael Woodford returned to Japan this week to face the board for the first time since being fired and subsequently blowing the whistle on the scandal.
Woodford, the company’s first non-Japanese CEO, was sacked after questioning a $687 million acquisition consulting fee. Olympus, which has a corner on 70 percent of the endoscopic camera market, launched the internal probe into the fee scandal after Woodford took his concerns to the media, the U.K.’s Serious Fraud Office and the U.S. Federal Bureau of Investigation.
They’ll look into a spate of dubious M&A activity, including its $2.2 billion buyout of Gyrus Group in 2008 (and the $687 million consulting fee that piqued Woodford’s concern in the first place), as well as the 2009 sale of its profitable diagnostics unit to Beckman Coulter for about $1 billion.
On this week’s trip Woodford will also meet with Japanese officials, including the Tokyo District Public Prosecutors Office and the Securities and Exchange Surveillance Commission, before heading to an Olympus board meeting on Friday, according to the Associated Press.
Woodford remains on the board of directors for the endoscopic giant and can only be removed from that role by shareholders.
He plans to push the already embattled board for full disclosure on two decades of concealing losses by channeling money through investment funds.
Olympus shares have lost nearly 65 percent since Woodford’s mid-October termination, falling from a closing price of roughly $31.91 (¥2,482) Friday, Oct. 13, to about $11.24 (¥869) in mid-morning trading today. Along the way, the stock marked a new low-water mark at $6.26 (¥484), the lowest it has been in 16 years.
Shares saw a 20 percent spike overnight on the Tokyo market, closing at $9.38 (¥725) on Monday night and opening at $11.24 (¥869) Tuesday morning. Markets are closed for a Japanese national holiday held Nov. 22.
The stock saw a 17 percent spike in the U.S., jumping from a close at $9.45 on Monday night to close at $11.10 Tuesday night.
Goldman Sachs announced Tuesday that it increased its holding in the endoscopic giant. Three Goldman Sachs units now hold 6.67 percent of Olympus’ outstanding shares, according to Reuters.