British prosecutor drops case against Japan’s Olympus

(Reuters) — Britain’s Serious Fraud Office (SFO) said on Tuesday it had ended a two-year case against Japanese endoscope maker Olympus Corp after a London court ruled that misleading auditors was not a criminal offense under English law.

The SFO, which charged Olympus and its British medical equipment subsidiary Gyrus in September 2013 for misleading an auditor, said it also could not have prosecuted individuals in the case because Japan does not extradite its nationals.

Olympus became engulfed in a $1.7 billion accounting scandal in 2011 after its former British chief executive Michael Woodford alerted prosecutors and the media to a series of unexplained payments after being fired for questioning company accounts.

Amid a global investigation and scandal, Olympus’s board resigned and three former executives and the company itself pleaded guilty in Japan to charges related to a cover-up.

But London’s Court of Appeal ruled in February that “English law does not criminalise the misleading of auditors by the company under audit” and the SFO decided on Tuesday against presenting evidence in its case.

Reporting restrictions on the case were lifted on Tuesday.

The Court of Appeal decision was a blow for the SFO which, under director David Green, has been keen to test the law to bring more companies to book.

Olympus bought Gyrus for $2 billion in 2008, paying the world’s largest advisory fee — equivalent to one-third of the purchase price — and later writing down the value of the deal along with a handful of other acquisitions.

The deal was part of a scheme to cover up years of investment losses.

Sony Corp bought an 11.5 percent stake in Olympus in 2012 in a much-needed cash injection. But it halved its stake in April to finance a restructuring.

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