05.06.15
O lympus Corp. of the Americas has reached an 11 billion yen ($92 million) out-of-court settlement in Japan with institutional investors over accounting fraud allegations.
The settlement was reached in late March but came to light in mid-April, according to DRRT, a Miami, Fla.-based international law firm. Olympus has been embroiled in controversy since late 2011, when former CEO Michael Woodford uncovered an accounting fraud by questioning exorbitant advisory fees paid during past mergers.
A preliminary settlement was reached in October 2013 but the details of that agreement were not hammered out until late March, DRRT said. “Once the fraud was exposed, we introduced the concept of alternative dispute resolution to Olympus as a possible solution to resolving shareholder claims in the Japanese system,” DRRT managing partner Alexander Reus noted in a statement.
Woodford himself later filed and settled claims that the company fired him in retaliation for blowing the whistle. Olympus subsequently was forced to restate five years of financial earnings to remain listed on the Tokyo Stock Exchange.
Three former Olympus executives pleaded guilty to accounting fraud in Japanese court in 2012, after the company admitted 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 February 2015, Olympus Corp. disclosed that its U.S. subsidiary had been facing an investigation for several years by the U.S. Department of Justice for allegedly violating anti-kickback laws and the False Claims Act (FCA), and said the parties had started discussions to settle the probe. Olympus Corp. of the Americas has been under investigation since November 2011 over potential anti-kickback and FCA violations by the firm’s medical business.
During the previous fiscal quarter that ended in December 2014, Olympus said it began engaging with the U.S. Department of Justice to resolve the litigation.
Although the company did not specify the kind of adverse effects (financial or otherwise) it potentially could incur from an agreement with federal prosecutors, Olympus bigwigs promised to “promptly disclose developments concerning this matter.”
Prosecutors in the United Kingdom’s Serious Fraud Office leveled criminal charges against Olympus Corp. in September 2013, accusing the multinational of making misleading, false or deceptive statements to a Gyrus Group auditor between April 2010 and March 2011.
The executives—a former Olympus chairman and two others—received suspended prison sentences in Tokyo court in July 2013. That fall, Chan Ming Fon, a former banking executive in Singapore, pleaded 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 lawsuit, 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 ruling, ending the case several months later.
In April 2014, six Japanese banks sued Olympus, demanding nearly 28 billion yen ($233.7 million) for losses relating to the accounting scandal.
The settlement was reached in late March but came to light in mid-April, according to DRRT, a Miami, Fla.-based international law firm. Olympus has been embroiled in controversy since late 2011, when former CEO Michael Woodford uncovered an accounting fraud by questioning exorbitant advisory fees paid during past mergers.
A preliminary settlement was reached in October 2013 but the details of that agreement were not hammered out until late March, DRRT said. “Once the fraud was exposed, we introduced the concept of alternative dispute resolution to Olympus as a possible solution to resolving shareholder claims in the Japanese system,” DRRT managing partner Alexander Reus noted in a statement.
Woodford himself later filed and settled claims that the company fired him in retaliation for blowing the whistle. Olympus subsequently was forced to restate five years of financial earnings to remain listed on the Tokyo Stock Exchange.
Three former Olympus executives pleaded guilty to accounting fraud in Japanese court in 2012, after the company admitted 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 February 2015, Olympus Corp. disclosed that its U.S. subsidiary had been facing an investigation for several years by the U.S. Department of Justice for allegedly violating anti-kickback laws and the False Claims Act (FCA), and said the parties had started discussions to settle the probe. Olympus Corp. of the Americas has been under investigation since November 2011 over potential anti-kickback and FCA violations by the firm’s medical business.
During the previous fiscal quarter that ended in December 2014, Olympus said it began engaging with the U.S. Department of Justice to resolve the litigation.
Although the company did not specify the kind of adverse effects (financial or otherwise) it potentially could incur from an agreement with federal prosecutors, Olympus bigwigs promised to “promptly disclose developments concerning this matter.”
Prosecutors in the United Kingdom’s Serious Fraud Office leveled criminal charges against Olympus Corp. in September 2013, accusing the multinational of making misleading, false or deceptive statements to a Gyrus Group auditor between April 2010 and March 2011.
The executives—a former Olympus chairman and two others—received suspended prison sentences in Tokyo court in July 2013. That fall, Chan Ming Fon, a former banking executive in Singapore, pleaded 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 lawsuit, 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 ruling, ending the case several months later.
In April 2014, six Japanese banks sued Olympus, demanding nearly 28 billion yen ($233.7 million) for losses relating to the accounting scandal.