UPDATE 3 Olympus unveils panel to probe M A scandal
Post on: 2011-11-02 By: admin
* Olympus says panel picked in line with law association
guidelines
* Panel to be chaired by Tatsuo Kainaka, former supreme
court judge
* Olympus says no deadline set for panel to report findings
* Panel chair's experience includes probe of Mizuho
TOKYO, Nov 1 (Reuters) - Olympus Corp on Tuesday
named six men, including a former Japanese supreme court
justice, to investigate past M&A deals at the core of a scandal
engulfing the endoscope and camera maker in a bid to stem an
exodus of irate investors.
The group, including lawyers and an accountant with
experience investigating governance at a bank, power company and
consumer electronics maker, were chosen based on guidelines on
third-party panels issued by the Japan Federation of Bar
Associations, Olympus said in a statement.
None of the six have had any previous association with the
company, an Olympus spokeswoman said. As yet, no deadline for
the group to report its findings has been set, she added.
"It's an experienced group and looks good, but how they will
proceed with the investigation is still unclear and there is
also the question of how much cooperation they will get,
including from Olympus," said Kengo Nishiyama, an analyst at
Nomura Holdings, who is an expert on corporate governance.
The all-Japanese committee will look into $687 million in
payments made to a financial adviser for the $2 billion purchase
of British medical equipment maker Gyrus in 2008, the biggest
such payment ever, and the acquisition of three companies in
Japan that Olympus, under chairman Tsuyoshi Kikukawa's
decade-long reign at the company, later largely wrote off.
The panel's chairman, Tatsuo Kainaka, who served as a
supreme court justice for seven years, earlier this year led an
investigation into the crash of cash machines operated by
Japan's No.2 bank, Mizuho Financial Group .
He was joined by Hideki Nakagome, a retired judge who served
on a panel investigating Tokyo Electric Power's nuclear
accident at its Fukushima plant. Also named to the panel was
ex-prosecutor Tomoyoshi Arita, and two lawyers from private
practice, Eiji Katayama and Osamu Sudo, who chaired a group
investigating JVC Kenwood Corp , which last year was
forced to issue a warning about its status as a going concern.
Also named to the panel was accountant Katsuaki Takiguchi.
Katayama, Sudo, Kainaka and Nakagome have not handled cases
involving mergers and acquisitions, according to legal filings
from legal publisher Westlaw Japan's database.
Sceptical investors were closely watching for any attempt by
Olympus management to appoint investigators who may be
sympathetic to the their position.
"I won't be dealing with Olympus shares any longer until
everything becomes clear," a fund manager said, declining to be
identified because of the sensitivity of issue.
A review in 2009 commissioned by Olympus' auditing board
cleared management of misconduct in the now-controversial
acquisition of three obscure Japanese firms. That report came
just few days after Olympus on May 12 warned it would post an
annual net loss of 114.8 billion yen ($1.5 billion) due to a
massive write down of assets, details of which were undisclosed
at the time.
Pressure on Olympus to clean house now has intensified in
the past several days, even after the resignation of Kikukawa,
the executive who led the ouster of CEO Michael Woodford that
prompted Woodford to turn whistleblower.
Woodford said he was sacked for asking too many questions
about the deals. Olympus says it did nothing wrong and insists
the Briton had to go because he was a poor
manager.
The head of the Tokyo Stock Exchange on Friday criticised
Olympus management for its handling of a crisis that has wiped
out half its market value and warned that it risked legal action
from shareholders unless the probe was truly independent.
Major shareholders too are clamoring for disclosure of what
went on in the Olympus boardroom when directors agreed to the
advisory fees and acquisitions at home.
Southeastern Asset Management, the company's largest
non-Japanese investor, wants Olympus to publish minutes of board
meetings related to the payments, a request Olympus has so far
declined.
Southeastern said it wanted a former CFO of a major Japanese
firm, whom it did not identify, to join the review.
Pressure on the firm to act has also come from Japan's prime
minister, Yoshihiko Noda, who in an interview with the Financial
Times asked the company for clarification of an incident that
has undermined Japan's global corporate governance
standing.
In Japan, however, third-party probes are generally
vulnerable to manipulation by management because they have no
legal authority, which can impede their access to information
and allow management to ignore their recommendations, according
to Nicholas Benes, head of the Board Director Training Institute
of Japan, a non-profit organization certified by the Japanese
government.
This problem was evident last month when Kyushu
Electric watered down a report by a third-party
investigation into its alleged attempts to manipulate public
opinion on the restarting of nuclear reactors, angering the
lawyer who led the investigation and industry minister Yukio
Edano.
"Unless the panel is fully independent then an investigation
is pointless," said Taiji Okusu, a senior official at the Japan
Corporate Governance Forum.
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