Olympus defies worst fears in restating crooked accounts
* Prior-year restatements reveal $700 mln dent in net assets
* Auditors sign offs on documents, but with qualifications
* Ex-CEO Woodford appeals to shareholders in comeback bid
* Shares pare losses after financial statements released
By Tim Kelly and Linda Sieg
TOKYO, Dec 14 (Reuters) – Japan’s scandal-ridden
Olympus Corp restated some of its crooked accounts on
Wednesday, revealing that a 13-year accounting fraud had put a
dent in its balance sheet, but the result defied investors’
worst fears.
The maker of cameras and medical equipment risks delisting
from the Tokyo Stock Exchange, and jeopardising its chances of
surviving one of Japan’s worst corporate scandals, if it is
shown to have deceived investors as to its very solvency.
But restated accounts for the five years to 2009/10, lodged
with the exchange two months after Olympus’ sacked CEO blew the
whistle on its dubious book-keeping, show that at no stage in
that period did the true financial position of the firm sink
into technical insolvency, where liabilities exceeded assets.
The most recent restatement, for end-March 2010, showed a 54
billion yen ($694 million) reduction in Olympus’ net assets, a
large but not life-threatening dent for Olympus whose
crashed-out market value is still worth almost seven times that
amount.
Investors, however, remained on tenterhooks for further
restatements from Olympus for the most recent full year, the 12
months to March 2011, and also its second-quarter results to
end-September which could still show nasty surprises.
The stock, which has lost about half its value since the
scandal broke in October, was down 5 percent in anticipation of
these final statements due later in the day.
The restated accounts also came with qualified opinions from
auditors, with an earlier newspaper report suggesting that the
auditors had been unable to confirm all money flows.
Olympus faces automatic delisting if it fails to release the
second quarter earnings by the end of day, a sanction that would
cut it off from equity capital markets and put it under pressure
to sell core assets.
The exchange can still delist the shares even if the
deadline is met, depending on the scope of the misreporting.
A delisting would also mark a humiliating low for the firm
which on Oct. 14 triggered the crisis by sacking its British
CEO, Michael Woodford.
Woodford immediately blew the whistle on the firm’s
accounting problems after he was fired and is now waging a
campaign to be reinstated, appealing to shareholders to support
his comeback as part of a complete renewal of the board.
The board has committed to resigning over the scandal, but
wants to choose its own successors before quitting, setting up
the prospect of a proxy war between its own candidates and those
being assembled by Woodford as part of his campaign.
“The shareholding balance is such that there is a realistic
chance we could win a proxy fight,” Woodford said. But he added
that such a battle would cause a split between foreign and
Japanese shareholders and that he hoped it could be avoided.
Some big foreign shareholders back Woodford’s bid but
Japanese institutional investors, although reticent, appear
worried about whether he can win over the company’s employees as
well as his plans to turn around the once-proud firm.
Woodford said he was willing to meet Olympus President
Shuichi Takayama at any time but added incumbent directors were
too discredited to be in a position to choose their successors.
Woodford, who was a rare foreign CEO in Japan, also sought
to soothe concerns about his plans to restore trust in Olympus.
“I want no part in selling Olympus or breaking it up,” he
said, adding he would not close down the firm’s struggling
camera business.
“People say the ‘gaijin’ president would shut it,” Woodford
said, using the Japanese word for foreigner. “I wouldn’t.”
Analysts have said Olympus’ big and profitable medical
business could be bought by a rival or private equity if it
became clear the firm could no longer effectively run it.
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