Acquisitions at Olympus Scrutinized

TOKYO — Even as the F.B.I. in the United States investigates exorbitant advisory fees that the Japanese company Olympus paid to a firm with links to the Cayman Islands, a second set of deals is drawing scrutiny here in Japan.

These other deals, which caused Olympus to lose hundreds of millions of dollars, involved an enterprising ex-Nomura banker and his well-connected older brother, whose roles have not yet received much public attention.

The former banker, Nobumasa Yokoo, runs a consulting firm that Olympus hired to advise it on acquisitions. Among other deals, documents show, Mr. Yokoo directed hundreds of millions of Olympus’s dollars into buying three money-losing start-up companies — with which he himself had been involved as an investor or executive — only to have Olympus quickly write off most of their value.

His older brother, Akinobu Yokoo, headed an investment unit that steered Olympus’s money into various other companies — from e-commerce to Italian restaurants — that had little to do with the business of making medical imaging equipment and digital cameras. A write-down of those investments helped plunge Olympus into the red in the fiscal year that ended in March 2009.

It is unclear how the Yokoo brothers became so involved in Olympus’s acquisition strategy. But their roles are evident from an examination of publicly available company filings and reports by credit ratings companies, as well as financial documents provided by Olympus’s recently ousted chief executive, Michael Woodford.

Mr. Woodford contends that he was fired after confronting the company’s chairman and board over the three deals linked to the younger Yokoo brother as well as exorbitant fees paid over Olympus’s 2008 acquisition of the British medical equipment maker Gyrus after the Japanese financial magazine Facta raised questions about the purchases. In the turmoil since Mr. Woodford’s firing on Oct. 14, Olympus shares have lost almost half their value. The transactions involving the Yokoos are separate from the Gyrus acquisition, which is currently the subject of an investigation in the United States by the Federal Bureau of Investigation. Mr. Woodford on Monday night said he was in contact with the F.B.I., though he declined to elaborate.

Documents most clearly link the younger Yokoo brother with at least three of the companies he later advised Olympus to acquire between 2006 and 2008 for a total of $773 million. Those companies — Humalabo, a maker of face creams; News Chef, a manufacturer of microwavable cookware; and Altis, a medical waste recycler — were relatively new and had never made money, credit research reports show. Olympus wrote off three-quarters of that total investment within a year of completing the deals.

Olympus says it has done nothing wrong other than making some business bets that turned sour. Nobumasa Yokoo could not be located for questions, while Akinobu Yokoo’s current employer would not make him available for comment.

So far, Japanese authorities have not indicated they are investigating the deals involving Nobumasa Yokoo, and neither brother has been accused of any wrongdoing.

But investors are pressing Olympus for answers. In an Oct. 20 letter, Southeastern Asset Management, an American money manager, with a 5 percent stake, demanded full disclosure on the three acquisitions — including whether any parties related to Olympus were affiliated with their previous owners.

“The questions that have been raised cannot go unanswered,” Southeastern Asset Management wrote. Olympus said last week it would form an independent panel to investigate the acquisitions, in light of shareholder pressure.

Nobumasa Yokoo’s part of the story traces as far back as 1998, to his days at the Japanese financial powerhouse Nomura. According to company records at the time, Mr. Yokoo — who had also spent time on Wall Street at Wasserstein Perella — was head of Nomura’s prestigious Shinjuku Nomura Building branch. There, he dealt with some of the firm’s top clients, including Olympus.

But in June of that year, he and many others at the firm chose to leave after a scandal involving payoffs to Japan’s organized crime gangs led to resignations, and later arrests, of top executives. Mr. Yokoo was not implicated in the scandal. But he left, telling the Nikkei business daily at the time that he wished “to be able to cook the rice I live on.”

Shortly afterward, Mr. Yokoo founded Global Company, a management consulting firm, according to Global’s legal filings.

Article source: http://www.nytimes.com/2011/10/25/business/global/acquisitions-at-olympus-scrutinized.html?partner=rss&emc=rss