Six Japanese banks have filed suit against medical device and camera maker Olympus and are demanding 27.9 billion yen ($273 million) for losses related to a $1.7 billion accounting scandal that rocked the company in 2012. The lawsuit arises from losses State Street Trust and Banking Co Ltd., Mitsubishi UFJ Trust and Banking Corp., and other banks suffered due to allegedly fraudulent financial statements published by Olympus in a period spanning 11 years.
A former banking executive at Olympus, Chan Ming Fon, has admitted that he helped conceal hundreds of millions of dollars in off-the-books loans made to two Olympus-controlled companies. Chan entered a plea at a hearing before U.S. District Judge Laura Taylor Swain in September and admitted his guilt. Chan, speaking through an interpreter, said at the time:
I and the Olympus Corp. planned and carried out a series of transactions designed to conceal loans that were to two companies. These loans were worth hundreds of millions of dollars. I acknowledge that my conduct was wrong.
Prosecutors first charged Chan in December 2012, claiming his money laundering formed part of a larger accounting scandal that in late 2012 shook confidence in the company and led to investigations in Japan and the U.S. At the time, Chan said he had also signed a false confirmation letter in a fake name that he knew would go to Olympus’ auditors in order to aid the fraud. He agreed to cooperate with prosecutors and the FBI in their ongoing case.
The prosecutors said in a plea agreement that they would recommend leniency provided Chan offered substantial assistance. Three former Olympus executives pled guilty to accounting fraud in Japanese court in 2012, after the company admitted to hiding massive losses through a series of sham transactions, including a $687 million payment it made for financial advice on its $2 billion takeover of British device company Gyrus Group PLC.
The executives, the ex-chairman of Olympus and two others received suspended prison sentences in Tokyo court in July. The fraud was first revealed by former Olympus CEO Michael Woodford, who later filed and settled claims that the company had fired him in retaliation for blowing the whistle. Olympus was forced to restate five years of financial earnings in order to remain listed on the Tokyo Stock Exchange.
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