November 27, 2020

Olympus Sues Executives Over Cover-Up

Olympus shares jumped nearly 30 percent on the announcement, as investors bet that legal action against those implicated in the $1.7 billion cover-up would head off a delisting from the Tokyo Stock Exchange. Shares in the company had lost four-fifths of their value at one point.

Still, critics warned that keeping tainted executives at the helm of Olympus threatened to undermine its turnaround effort by allowing discredited board members to name their successors and subvert meaningful reform. The company remains in dire need of fresh capital after restated accounts showed its shareholder equity at far lower levels than previously disclosed.

Olympus defended its decision. “The plan is for the current board members who were found responsible and are subject to lawsuits to complete passing on their roles to avoid any impact on business,” the company said in a statement.

Olympus, the Japanese manufacturer of cameras and the medical devices called endoscopes, has admitted to concealing losses dating to the 1990s using an elaborate scheme involving offshore funds in a case that has cast a spotlight on corporate governance lapses in Japan.

That admission came after its former president and chief executive, Michael C. Woodford, blew the whistle in October on fraudulent accounting at the company — an action for which he was fired.

Mr. Woodford, who is British, later made a bid to return to the company with a fresh slate of directors, but he abandoned that effort last week after Japanese institutional investors continued to back Olympus’s current management. On Tuesday, he blasted Olympus over its announcement, pointing out that three directors who had fired him instead of investigating his allegations should not be allowed to remain on the board.

“If these three individuals continue in office, it is completely the wrong basis to revitalize Olympus,” Mr. Woodford said. “The only way forward is an entirely new board of directors, untainted by the past scandal,” he said in an e-mailed statement.

Southeastern Asset Management, a U.S. firm that is Olympus’s biggest overseas stockholder, has also urged the company to purge its current management.

Olympus “continues to suffer under shoddy corporate governance and an utterly discredited board,” Josh Shores, a principal at Southeastern Asset, said in a statement last Friday. “We maintain that the board should be replaced and a new board should oversee the company’s revival.”

The Tokyo-based company said it was seeking up to 3.6 billion yen, or $47 million, in damages from 19 executives, including former Chairman Tsuyoshi Kikukawa, former Executive Vice President Hisashi Mori and its former internal auditor Hideo Yamada. A third-party investigative panel appointed by Olympus said last month that the trio had orchestrated the scheme to mask investment losses.

Olympus is also suing Shuichi Takayama, the current president, for as much as 500 million yen, according to the company statement Tuesday.

Olympus refused to make any of its executives available for comment.

The scandal has led to investigations in Japan, the United States and Britain.

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Sony Swings to Big Loss After Natural Disasters

TOKYO — The March 11 earthquake and tsunami probably pushed Sony to a $3.2 billion loss in the just-ended fiscal year, the electronics and entertainment giant warned Monday, the latest Japanese manufacturer to report a huge economic hit from the disaster.

The annual loss would be Sony’s biggest in 16 years, a major setback to chief executive Howard Stringer’s drive to turn around the once-legendary maker of PlayStation video game consoles, Bravia flat-panel TVs and Vaio laptops.

Sony suffered damage at nine plants in northeastern Japan in the quake and tsunami, which also disrupted supply chains and put a damper on domestic consumption. A series of hacker attacks on Sony’s online services, which forced the company to shut down its PlayStation Network, has also clouded the outlook for the Japanese manufacturer.

After assessing the damage, Sony said Monday in a preliminary earnings statement that it expected to report a net loss of 260 billion yen ($3.2 billion) for the year ended March 31, 2011, from a previous forecast for a profit of 70 billion yen. The company reports full earnings on Thursday.

Much of the net loss came from a 360 billion yen provision for deferred tax assets the company is making in light of the uncertain outlook for future earnings. It left its forecast for annual operating profit unchanged at 200 billion yen ($2.4 billion).

For the current fiscal year ending March 2012, Sony said it expected operating profit to stay around 200 billion yen. This took into account the lingering effects of the quake, which will likely shave 150 billion yen off operating profit, Sony said.

Known costs related to the hacker attacks have so far reached about 14 billion yen, Sony estimated. Sony has said it hopes to get all affected networks up and running by the end of May.

Sales for the current year would likely come to about 7.18 trillion yen, down slightly from 7.20 trillion yen, it said. Sony said it expected net profit to turn positive this year, though it did not give an estimate.

Sony’s earthquake woes have come at a time the company is struggling to reinvent itself after being usurped in TVs and digital music players. Even its stronghold in the video gaming business is succumbing to cheaper and nimbler rivals. Sony has now lost money three years in a row.

Just as damaging have been the hacker attacks that forced Sony to shut down its PlayStation Network for almost a month. Sony has acknowledged that personal information from over 100 million accounts were compromised in the attacks.

In an interview last month, Mr. Stringer defended Sony’s response to the attacks, which some critics have said was too slow.

Sony is the latest Japanese manufacturer to report substantially lower earnings following the magnitude 9 earthquake in March, which devastated much of Japan’s northeastern coast.

Earlier this month, Toyota, whose operations have been severely disrupted since the disaster, said that profit fell 77 percent for the quarter ended March 31. Toyota, which is likely to lose its crown as the world’s biggest automaker this year, said it could not forecast earnings or production for the year ahead because of uncertainty about its ability to resume normal output levels.

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