Olympus Corp. said on Tuesday that the top executives used acquisitions to hide massive losses, reversing denials of any wrongdoing.
As the Satyam scam had hit India, this scam emerged as one of the largest accounting frauds in the Japanese history tarnishing the nation’s corporate image.
Tokyo-based Olympus, which makes cameras and medical equipment, has been battered by a scandal over a $687 million payment for financial advice and expensive acquisitions of companies unrelated to its mainstay businesses.
The company consistently denied any wrongdoing and sacked its chief executive last month after he raised concerns about the acquisitions and the payment to an obscure Wall Street firm.
Olympus did an about-face on Tuesday, issuing a statement saying that an independent panel investigating allegations had found that acquisitions were used to cover up losses on investments dating to the 1990s.
During that time in Japan known as the 'lost decade', many Japanese companies took to making speculative investments in securities to offset sluggish sales following the bursting of Japan’s economic bubble.
“We have conducted extremely improper accounting,” said Mr Shuichi Takayama, who took over as the president in late October.
Olympus shares plunged 29 per cent in Tokyo and have lost about two thirds of their value since Mr Michael Woodford was sacked as CEO on October 14. Nomura Holdings Inc. slid 14.9 per cent amid fears the scandal will engulf securities companies.
Business groups and analysts have said the scandal reflects weaknesses in Japan’s corporate governance including too few independent directors on company boards.
Takayama blamed the company’s previous leadership for the failure to ever account for the losses. The company is considering legal action against them.
Olympus dismissed the executive vice-president, Hisashi Mori, saying he was involved in the cover-up along with Tsuyoshi Kikukawa, who abruptly resigned as chairman last month in an attempt to placate angry shareholders.
A company auditor also tendered his resignation, it said.
“We needed a higher level of corporate governance. From now on we’ll do our utmost not to make the same mistake again,” Takayama said.
He said he could not disclose the size of the losses or any other detail because all data had been handed over to the independent panel. “I have no intention to step down at this moment because my responsibility is to fix this company,” he said.