SFO to prosecute Olympus and British unit for falsifying accounts

Serious Fraud Office move drags $1.7bn accounting scandal back into spotlight two years after it first erupted

The Serious Fraud Office will prosecute Olympus and its British unit Gyrus for falsifying accounts, the Japanese medical equipment maker said on Wednesday, dragging a $1.7bn (£1.1bn) accounting scandal back into the spotlight after it erupted nearly two years ago.

Olympus plunged into the red and its share price tanked after details of massive hidden losses were discovered late in 2011, but it has since swung back into profit and Sony paid ¥50bn (£321m) to become its biggest shareholder this year.

The move by the SFO revives the scandal after a guilty verdict for three former executives in a Japanese court in July and a subsequent share issue gave the appearance that Olympus had put the incident behind it, with its stock trading back at pre-scandal levels.

The three executives were fined a combined ¥700m and handed suspended sentences.

The company’s shares slid as much as 6.3% on Wednesday after the company said the SFO would prosecute Olympus and Gyrus Group for a suspected breach of the UK Companies Act 2006 by falsifying financial accounts in 2009 and 2010. The shares later trimmed losses to end down 2.9% at ¥2,798.

Olympus said this would mark the first time the SFO had decided to prosecute a company, rather than an individual, for fraud, and that the lack of precedent made it unclear how long proceedings may take or what level of fines may be imposed. It added that court proceedings would begin this month.

An Olympus spokesman said the firm was also still under investigation by the US department of justice.

Olympus bought Gyrus, a British medical equipment firm, for $2bn in 2008. In addition to paying the world’s largest M&A advisory fee, equivalent to one-third of the purchase price, Olympus later wrote down the value of the deal along with a handful of other acquisitions.

The deal was part of a scheme to cover up investment losses dating back as much as a decade or more, which came to light when Olympus’s British chief executive at the time, Michael Woodford, blew the whistle after being fired from the company for pressing for details on the investments.

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