Japanese camera and medical equipment maker Olympus Corp. will pay $646 million to settle two different investigations from the federal government over claims it entered into a kickback scheme with physicians and hospitals and violated the U.S. Foreign Corrupt Practices Act.
Olympus will pay a $312.4 million criminal penalty over the alleged kickback scheme and $310.8 million to settle False Claims Act violations, which the Justice Department said is the most a medical devices company has ever paid under the act. Additionally, the company’s subsidiary, Olympus Latin America Inc., has agreed to pay $22.8 million over alleged FCPA violations regarding a kickback scheme targeted at increasing medical equipment sales in Central and South America.
Olympus has been embroiled in controversy since 2011, when former Olympus CEO Michael Woodford first revealed an accounting fraud by questioning exorbitant advisory fees paid during past mergers. Woodford himself later filed and settled claims that the company had fired him in retaliation for blowing the whistle. Olympus was subsequently forced to restate five years of financial earnings to remain listed on the Tokyo Stock Exchange.
Three former Olympus executives pled guilty to accounting fraud in Japanese court in 2012, after the company admitted to hiding more than $1 billion in 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 in 2008.
In September 2013, Chan Ming Fon, a former banking executive in Singapore, pled guilty to conspiring to help Olympus hide money as part of the accounting fraud. About four months later, a Pennsylvania federal judge preliminarily approved a $2.6 million settlement to be paid by Olympus to resolve a shareholder class action claiming the company failed to tell investors that it had paid “an unprecedented $687 million” fee — which far exceeded the typical Wall Street advisory fee of 1 to 2 percent — for advice on the Gyrus deal. The judge issued a final judgment ending the case several months later. In April 2014, six Japanese banks sued Olympus demanding nearly 28 billion yen ($235 million) for losses related to the accounting scandal.
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