Olympus Corp. has sued 19 former and current executives for damages that the Japanese camera and medical equipment maker says it has suffered over a massive cover-up of investment losses. The lawsuit, filed by auditors on behalf of the company in Tokyo District Court, targets former CEO Tsuyoshi Kikukawa, current President Shuichi Takayama and 17 other executives that the company says participated in or knew about the fraudulent activity. The scheme – which first came to light after former President Michael Woodford blew the whistle – has raised serious questions about corporate governance in Japan, and whether major companies are complying adequately with global standards.
Financially battered Olympus said the lawsuit follows a report from an investigation by an independent panel that the Tokyo-based company had set up. Then-President Masatoshi Kishimoto, as well as subsequent executives – including Kikukawa – knew about the scheme, the company says. A small circle of employees was also involved. It was reported that six board members implicated in the report, including Takayama, will resign at the next shareholder meeting, scheduled for March or April. Kikukawa is being sued for 3.6 billion yen ($47 million). The company is seeking smaller amounts from other Defendants, including 1 billion yen ($13 million) from Kishimoto.
Under Japanese law, auditors represent the company when executives on the board are targeted in damage lawsuits. In the Olympus lawsuit, three auditors, two of them outsiders, are representing the company. None of them were implicated in the scandal. Olympus alleges in the lawsuit that it suffered direct losses to its finances, in terms of fees and interest paid to run the scheme – as well as losses stemming from the improper handling of the scandal after it surfaced. It’s alleged further that the “credibility of Olympus’ corporate governance and the public’s trust of Olympus were seriously damaged.”
Japanese prosecutors, which have begun a separate investigation, raided company headquarters and Kikukawa’s home in December. Olympus barely met its mid-December deadline to avoid being removed from the Tokyo Stock Exchange by filing corrected earnings for the April-September first half and for the past five fiscal years. Olympus’ stock plunged amid the scandal and it’s now trading at about half of its pre- scandal value.
Sources: Claims Journal and Associated Press
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