3 guided Olympus' loss-hiding

Three former employees of securities companies who instructed Olympus Corp. how to hide losses exchanged more than 2,000 e-mails with Olympus executives and received over 1.1 billion yen (S$18.1 million) in compensation, according to a report by the company's third-party investigation panel.

The report revealed details about the role the three men played in the optical equipment manufacturer's concealment of losses by transferring deficits to overseas funds and acquiring foreign companies.

Among others, they exchanged e-mails with and were compensated by Hisashi Mori, former vice president of Olympus.

The special investigation squad of the Tokyo District Public Prosecutors Office and the Metropolitan Police Department are considering questioning them to help unveil the entire picture of the scandal.

According to the report and other sources, a former president of a Japanese unit of an investment advisory company mediated Olympus' acquisition of Gyrus Group PLC, a British medical device maker.

The man was an employee of Nomura Securities Co. and then moved to a foreign-affiliated securities firm. In the 1980s, he was involved in the investment of Olympus' assets.

During this period, the man became acquainted with Hideo Yamada, a former full-time auditing officer of Olympus who worked in the company's accounting department at the time.

The man introduced Yamada to the head of a US investment advisory firm, who was also a former Nomura Securities employee.

In 1998, just before Japan introduced a new accounting rule that requires companies to calculate asset values based on market value, Yamada asked the two to cooperate to transfer Olympus' losses to a fund.

The two established the fund in the Cayman Islands some time before March 1998.

The head of the US firm played the leading role in the loss-hiding scheme with the acquisition of Gyrus. At Mori's request, he sent documents and e-mails to Olympus in which the US firm demanded greater compensation, money that was actually funds to hide the losses.

Based on the demand from the US firm, Mori explained to Olympus' board of executives that the investment advisory firm had asked for cash to cushion the blow of the Lehman shock.

Mori persuaded the board of directors to pay a total of 65 billion yen to the US firm as compensation. The money was actually used to cover the losses.

Another former Nomura Securities official, now president of a business consultant firm, advised Olympus on investments. He left Nomura Securities in 1998 after serving as a branch head.

Yamada also asked him to help transfer the losses, and he introduced Yamada to an official of a bank in Liechtenstein. This was to provide the fund with money to buy financial products with latent losses.

The consultant firm president himself ran the fund that was used for the loss transfer. He also proposed that Olympus take over three Japanese companies, acquisitions that were used to make about 73 billion yen to cover the losses.

A total of 2,159 e-mails were exchanged between the three and the Olympus side--Yamada and Mori. The investment advisory firms received 1.18 billion yen in compensation.

"They involved themselves in the scheme, knowing their actions were illegal accounting deals, and helped hide losses for many years," the committee said in its report.

About 20 overseas funds and financial firms took part in Olympus' loss-hiding scam. The company's losses, which amounted to 96 billion yen in 1999, ballooned to 117.7 billion yen in 2003.

The accused Olympus executives covered the losses with 134.8 billion yen made through the acquisitions of the three Japanese companies and Gyrus, which took place between 2006 and 2010.