Former Olympus Chairman Arrested in $1.7 Billion Accounting Scandal

According to a statement by the Tokyo District Public Prosecutor's Office, the former Olympus Corp. Chairman Tsuyoshi Kikukawa was arrested by Japanese prosecutors in one of the biggest ever financial scandals to hit Japan.

Kikukawa was arrested on suspicion of violating laws banning falsification of financial statements in a $1.7 billion accounting fraud. The former Executive Vice President Hisashi Mori, former company auditor Hideo Yamada and former broker Akio Nakagawa were also arrested on suspicion of violating the Financial Instruments and Exchange Law.

We will continue to cooperate fully with the authorities to uncover the facts, an Olympus spokesman said, according to Dow Jones Newswires.

In November the firm admitted that it had hidden the losses after the allegations were first aired by Michael Woodford when he was ousted as chief executive and president the month before. Olympus’ Tokyo headquarters and its affiliated offices were raided on Dec. 21 by prosecutors after the company said in November that Kikukawa and two other executives colluded to hide losses from securities investments from the 1990s.

The company inflated takeover costs of London-listed Gyrus Group Plc and three Japanese companies with the intention of boosting goodwill, according to the Dec. 6 panel report. Yamada and Mori planned to write down the goodwill over years to cancel out losses that were kept off Olympus’s balance sheet.

Olympus has filed lawsuits against Kikukawa and several other individuals the company deems responsible for the accounting scandal. The company is seeking as much as 3.6 billion yen ($46 million) in damages from executives, including Kikukawa.