The Serious Fraud Office has the dubious accolade of becoming the first international anti-fraud agency to prosecute Japanese camera and medical equipment manufacturer Olympus over a £1.1bn accounting scandal.
The company has been charged with ‘misleading and deceptive accounting’, relating to the acquisition of British medical equipment company Gyrus, which it bought in 2008 for $2.2bn (£1.4bn).
The news has dug up the accounting scandal two years after it first erupted onto the scene. The company’s shares took a slide this morning, dropping by 6.3% on the news of the SFO’s planned prosecution of Olympus and Gyrus Group, but have rallied back up to end down just 2.85%.
‘It is difficult to predict the outcome of this matter or estimate the level of fines that may be imposed on the company and Gyrus Group Limited,’ said Olympus of the SFO probe. ‘The potential financial impact of this prosecution on Olympus group's business is unclear.’
By now, the story behind the Olympus scandal is pretty well known: in 2011, chief executive Michael Woodford was sacked just two weeks into his tenure after he challenged board members for payments to advisers that looked suspiciously large. What transpired was Japan’s biggest-ever accounting fraud: the company had hidden losses of $1.7bn dating back to the 1990s.
The acquisition of Gyrus was one of the deals questioned by Woodford during his short but eventful time at the helm of the Japanese firm.
So far, former chairman Tsuyoshi Kikukawa and executives Hisashi Mori and Hideo Yamada have received suspended sentences, having pleaded guilty in the Japanese courts of falsifying accounts.
Olympus had started to show some signs of recovery in last year, having plunged into the red when the scandal first came to light; the camera and medical supplied giant swung back into profit last November, following Sony’s $644m investment in the firm in September.
But it looks like the SFO is reluctant to let sleeping dogs lie. Given the British former chief executive Woodford, who was based in Japan, didn’t know about the scandal until a whistleblower told him, gathering evidence of any culpability here in the UK is going to be pretty tricky. And if there's one thing the SFO doesn't need it's another difficult prosecution, it is still smarting after former boss Richard Alderman's departure and the Tchenguiz case.