Olympus sets up panel after shareholder concern

In a stock exchange announcement in Tokyo, Olympus confirmed that it would set up an “independent committee consisting of experts including lawyers and accountants” to investigate previous merger and acquisition deals.

The company has been forced to set up the committee after its ex-chief executive, Michael Woodford, made allegations that a $687m “improper payment” was made by the company to unknown parties in the Cayman Islands in 2008.

Following his allegations, the share price of Olympus plunged by almost 50 per cent and some of its biggest shareholders, including Nippon Life and Harris Associates, demanded answers.

This is just a mechanism for Olympus to push the issue further down the line, to buy them time while the current media spotlight diminishes. Former Olympus chief executive Michael Woodford

David Herro, chief investment officer for international equities at Harris Associates, told Channel 4 News: “Olympus shareholders have been greatly hurt by the value destruction that, in our view, can be traced back to an unacceptably lax approach to corporate governance.

“For this reason, we have asked the Olympus board of directors to engage an independent investigator to immediately review the previous management’s actions and determine accountability.”

The panel is an attempt to address these shareholder concerns, Olympus said.

Jon Snow interviews sacked chief executive Michael Woodford

In a statement, the company said it had “received letters from some of our shareholders regarding the previous mergers and acquisitions. We are now preparing responses to the questions, and any information that should be disclosed will be promptly made public.”

But the company’s former chief executive Michael Woodford told Channel 4 News: “This is just a mechanism for Olympus to push the issue further down the line, to buy them time while the current media spotlight diminishes.

“Olympus has admitted it made a payment of $687 million. They simply need to answer what the $687 million was given for. For what possible advice was it given? Why was it paid to unknown parties in the Cayman islands? It’s simple to answer.”

Questions

Mr Woodford told Channel 4 News earlier this week that Olympus had paid the huge sum – almost the equivalent of two years’ profit of the entire corporation – to advisers on a takeover deal.

He claimed he was fired when he raised questions over the payments, which were made to advisers on a deal to buy a company called Gyrus for $2bn.

Mr Woodford also commissioned accountants PWC (PriceWaterhouse Cooper) on 3 September to look into the payments. The report also raised questions, suggesting that Olympus may face legal and regulatory scrutiny over the deal.

Speaking on Channel 4 News on 17 October, Mr Woodford told Jon Snow: “Normally, if you’re acquiring a company, professional advice would be between 1-2 per cent. Olympus paid 35 per cent – at least $700m, which is almost two years’ profit of the entire corporation – to unknown parties in the Cayman Islands.”

On Wednesday, Olympus admitted it had made the payment but said it was legitimate. The Japanese corporation has refused to name the advisers in the deal and says it does not know of their whereabouts, but Mr Woodford has identified them as New York-based Axes America LLC, and AXAM Investments Ltd in the Cayman Islands. He also said that once the payment to the Caymans had been made, the account had been closed.

Olympus maintains that Mr Woodfood was fired because “major differences had arisen between Mr Woodford and other management regarding the direction and conduct of the company’s business, and this had become an impediment to management decision-making” and not because of questions asked about the Gyrus deal.

Below: Jon Snow interviews Michael Woodford, 17 October 2011