Olympus Scandal Takes A New Turn As Shares Fall 45%

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The Olympus scandal which has seen the digital camera Companies shares fall 45% since Friday took a new turn overnight after the Companies Chairman broke his silence over allegations by the Japanese group’s ousted chief executive that it paid huge fees to a mysterious financial adviser.

The Olympus scandal which has seen the digital camera Companies shares fall 45% since Friday took a new turn overnight after the Companies Chairman broke his silence over allegations by the Japanese group’s ousted chief executive that it paid huge fees to a mysterious financial adviser.

Former Olympus President Michael C. Woodford claimed the company paid $687 million, or a third of the purchase price, to two advisory companies related to its acquisition of Gyrus Group Plc in 2008. Those Companies have since disapeared with the UK Fraud Squad now called in to investigate.

Olympus Chairman Tsuyoshi Kikukawa told the Nikkei newspaper yesterday the actual amount was about 30 billion yen and the company issued a statement denying the payments broke accounting rules.

“Investors expected that management would deny everything but in fact the chairman started to admit things,” Yuuki Sakurai, president at Fukoku Capital Management Inc., said in a phone interview. “Only the numbers are different. They admitted the payment even though several years ago they didn’t disclose it. It makes you wonder if there’s more out there.”

TheWall Street Journal said that the scandal deepened after Woodford handed documents relating to the fees including a PricewaterhouseCoopers report that he commissioned to the U.K.’s Serious Fraud Office. He requested an investigation because the payments were made in the U.K. Olympus may sue Woodford for leaking internal information to the press.

A U.K. fraud investigation is “unlikely” to trigger a move by the Tokyo Stock Exchange to put Olympus on a watch list, according to Kazuyuki Miyaji, a division manager in the exchange’s disclosure division. That decision would hinge on the company’s own version of events and the results of the bourse’s own investigation, he said in a phone interview.

Potential offenses by Olympus include false accounting and breaches of duties by the board, according to the Oct. 11 report by PwC that Woodford provided to Bloomberg News. Most of the payments were made through Olympus’s U.K. unit, Woodford said in an interview.

One of the advisers receiving the fees, Cayman Islands- incorporated AXAM Investments Ltd., was removed from the local registry in 2010, according to an official filing. PwC said they were unable to identify the owners of AXAM Investments.

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