Tokyo prosecutors on Wednesday charged Olympus Corp and six key figures in the $1.7 billion accounting fraud at the camera and endoscope maker, tightening their case in the investigation of one of Japan's biggest corporate scandals.

Prosecutors charged ex-chairman Tsuyoshi Kikukawa, former executive vice-president Hisashi Mori and former auditor Hideo Yamada with inflating the company's net worth in financial statements for the fiscal years ended March 2007 and 2008, in violation of the Financial Instruments and Exchange Law.

Also charged were former bankers Akio Nakagawa, Nobumasa Yokoo and Taku Hada, prosecutors said in a statement.

The six were arrested in February on suspicion of filing false financial statements to help hide huge investment losses through complex takeover deals at the company. Prosecutors did not charge a seventh person they arrested last month.

We take these charges very seriously and will continue to strengthen our corporate governance, Olympus said in a statement. We again express our deep apologies to shareholders, investors, business partners, customers and other related parties for causing trouble.

Prosecutors on Wednesday also rearrested Kikukawa, Mori, Yamada and Nakagawa on suspicion of also submitting false financial statements for the fiscal years ended in March 2009, 2010 and 2011.

In Japan it is common for prosecutors to re-arrest suspects under new but related counts. They must decide within 20 days whether the suspects are to be formally charged over the fresh allegations.

Japan's securities watchdog on Tuesday requested that prosecutors file criminal charges against the individuals involved in the scandal and the company itself.

Under the charges, Olympus executives could face up to 10 years in prison, or a fine of up to 10 million yen (about $125,000), lawyers have said.

The Securities Exchange and Surveillance Commission (SESC) will also recommend the Financial Services Agency, a government agency overseeing banking, securities and insurance, fine the company more than 100 million yen ($1.2 million) for false accounting, the Nikkei newspaper reported.

The Tokyo Stock exchange said the latest charges would not affect the company's current listing status. In January, the exchange said Olympus could keep its listing but that it would be placed on a security on alert list of companies seen needing to urgently improve their internal management.

The scandal erupted in October when former chief executive Michael Woodford was fired by the Olympus board after he questioned the company's dubious bookkeeping.

Since then, Olympus has admitted it used improper accounting to conceal massive investment losses under a scheme that began in the 1990s. The firm is under investigation by law enforcement agencies in Japan, Britain and the United States.

In December, it filed five years worth of corrected earnings statements to account for the scandal.

Olympus itself is suing for mismanagement five of its eight internal directors, including current President Shuichi Takayama. The company has proposed a new board of directors as it tries to recover from the scandal, subject to approval at a shareholders' meeting next month.

Shares of Olympus, which have lost about half of their value since the scandal broke, closed down 1.1 percent at 1,286 yen on Wednesday afternoon, compared with a 0.6 percent decline in the broader market.

(Reporting by Chris Gallagher; Additional reporting by Mayumi Negishi; Editing by Chris Lewis)

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