However, a suspended three-year sentence for the executive, Tsuyoshi Kikukawa, means he is likely to avoid prison.
Hideo Yamada, a former auditing officer implicated in the scandal, was also given a suspended three-year sentence Wednesday, and Hisashi Mori, a former executive vice president, received a lesser suspended sentence.
The Tokyo District Court ordered Olympus to pay 700 million yen, or $7 million, in fines for falsifying its financial reports, which the company said was to mask hefty investment losses. For its financial year that ended last March, Olympus booked a net profit of ¥8 billion.
The sentencing brings to a tentative close a tense scandal that pitted a former Olympus president, a Briton, against his Japanese colleagues, who eventually admitted to running a cover-up scheme that spanned two decades.
Michael C. Woodford, Olympus’s first foreign chief executive, was abruptly fired in October 2011 after he presented the company’s board with evidence of accounting fraud and urged its directors to come clean.
Mr. Kikukawa, the chairman at the time, took over as president and initially told the news media that Mr. Woodford’s Western management style was not a good match for Olympus. But a campaign by Mr. Woodford to air his side of the story pressured the company into conducting an independent review.
The investigation implicated Mr. Kikukawa and two other executives in an elaborate scheme to cover up losses, involving offshore money, inflated acquisition payouts and a network of obscure brokers.
The scandal cast a pall over confidence in corporate governance at Japan’s biggest multinationals, as investors asked whether Olympus had been a bad apple or whether more Japanese corporations were hiding bombshells in their financial books.
Its outcome has also been seen as a test of how vigorously white-collar crime in Japan would be investigated and punished by the authorities, who have been accused of being soft, especially with large, well-connected corporations.
Olympus’s treatment of Mr. Woodford has shone a negative light on Japan’s recent efforts to protect and encourage whistle-blowers in a business culture that has long advocated corporate loyalty and censured outspoken employees. Japan passed a law to protect whistle-blowers only seven years ago, and some legal scholars say the protections are not enough to encourage employees to report on corporate wrongdoing.
Mr. Kikukawa, president at Olympus for a decade before Mr. Woodford took over, had pleaded guilty to the charges. But the defense argued that jail time would be too harsh for an executive who had already suffered social censure for his mistakes.
Tokyo prosecutors had asked for a five-year jail term for Mr. Kikukawa and a 1 billion-yet fine for Olympus, according to Kyodo News.
In the court decision Wednesday, Judge Hiroaki Saito said that the former executives had simply taken over a scheme started in the 1990s by their predecessors. He also pointed out that there was no evidence that Mr. Kikukawa and his colleagues had pocketed any money.
Mr. Kikukawa and Mr. Yamada ‘’inherited a negative legacy and weren’t involved in the decision-making process to hide losses,’’ Mr. Saito was quoted in local media reports as saying in court. ‘’They didn’t benefit personally from hiding losses.’’
Masatoshi Kishimoto and Toshiro Shimoyama, the former executives who are thought to have made the decision to hide the losses, were not charged because the statute of limitations had expired.
On an Olympus Web site dedicated to “restoration of trust” in the company, the current president, Hiroyuki Sasa, apologized for the “shortcomings in corporate governance that resulted in financial improprieties.”
Article source: http://www.nytimes.com/2013/07/04/business/global/suspended-sentences-in-olympus-accounting-fraud-case.html?partner=rss&emc=rss