TOKYO--In an early test of its avowed intent to enhance
regulatory compliance after a multi-billion dollar accounting
scandal, Olympus Corp. (7733.TO) said it has informed the U.S.
Department of Justice of possible expense accounting irregularities
in a doctor training program in Brazil that could test the rules of
the Foreign Corrupt Practices Act.
The news was enough to snap investors' brittle confidence in the
ability of new management to steer the still-troubled camera and
medical equipment maker toward lasting profitability.
Olympus shares were down by as much as 7% in Tokyo, weighed by
the possibility of an impact on the firm's business in the U.S., as
well as concerns about a new lawsuit by a shareholder seeking
redress for the loss of value in its Olympus holding.
Triggered by the dramatic resignation of former CEO Michael
Woodford last October, admissions by Olympus officials that they
covered up $1.5 billion in investment losses landed the firm in one
of Japan's biggest corporate scandals in years and generated
intense debate about the state of corporate governance in the
country.
An Olympus spokesman Wednesday confirmed a report by Bloomberg
quoting chairman Yasuyuki Kimoto as saying his company first raised
the Brazil issue with the DOJ "four to five months ago." The
potential problem may be related to the way the company handled
doctors' expenses for travel, meals or entertainment at a training
facility operated by Olympus in Brazil.
"We might agree to some sort of violation of the Foreign Corrupt
Practices Act in Brazil...We understand the DOJ is trying to gather
lots of information on us," Mr. Kimoto said in the interview,
according to Bloomberg.
The Foreign Corrupt Practices Act of 1977 makes it illegal to
bribe government officials to secure or retain business, and
requires companies whose securities are listed in the U.S. to keep
accurate books and records.
The Olympus spokesman Wednesday said the company "would like to
decline comment further" at this stage on its findings in Brazil,
or what it has told the DOJ, because an investigation is still
ongoing.
As economic growth slows in developed countries, multinationals
are looking to expand in emerging markets, where violations of the
FCPA are a greater concern, according to Lesli Ligorner, a
Shanghai-based partner at Simmons & Simmons.
In 2011, the U.S. Securities and Exchange Commission took civil
action in 20 cases of FCPA violations, compared with 17 cases in
2007. The Department of Justice can choose to prosecute companies
for FCPA violations as well, although cases can take years to
investigate.
Gina Talamona, a spokeswoman for the DOJ, declined to comment on
the Olympus findings in Brazil.
Shares in Olympus closed 6.8% lower at Y1,380, compared with the
benchmark Nikkei Stock Average's 0.6% drop.
Concerns were exacerbated by Japanese medical-equipment maker
Terumo Corp.'s (4543.TO) move to file a damage compensation lawsuit
against Olympus.
The suit by Terumo, which holds a 2.1% stake in Olympus, comes
despite it having proposed a merger with Olympus in an apparent bid
to counter Sony Corp.'s (6758.TO) leading position among a group of
bidders for a stake in the scandal-hit camera maker. Olympus has
said it is looking for a partner to invest about Y50 billion to
shore up its finances.
Despite seeking to coax Olympus into a broader deal, Terumo said
Wednesday it has filed lawsuit with the Tokyo District Court to
seek an unspecified amount of compensation suffered from the steep
falloff in the value of Olympus shares it holds as the accounting
scandal unfolded. In its darkest days, Olympus saw as much as 80%
of its market value wiped out as the implications of the cover-up
by former Olympus officials reverberated around the Tokyo
market.
Terumo said it was forced to book a loss of Y8 billion in the
business year ended March, including a Y6 billion securities
valuation loss.
A separate spokesman at Olympus said the company has not
received a legal complaint.
-Kathy Chu and Kenneth Maxwell contributed to this story.
Write to Hiroyuki Kachi at Hiroyuki.Kachi@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires