Japanese prosecutors Thursday arrested three former Olympus Corp. executives including the company's ex-chairman over their alleged roles in orchestrating a cover-up of massive losses at the camera and medical equipment maker.
The former chairman Tsuyoshi Kikukawa along with executives Hideo Yamada and Hisashi Mori were arrested on charges of violating securities and financial laws, prosecutors said in a statement. Four consultants at other companies linked to Olympus were also arrested. Olympus as a corporation could face charges too.
The Tokyo-based company said in a statement it took the arrests seriously and promised to cooperate fully with the ongoing investigation.
The maximum penalty for the securities and financial charges is 10 years in prison or a 10 million yen ($128,000) fine.
The scandal surfaced late last year when then Olympus President Michael Woodford raised questions about huge payments for financial advice and acquisitions of companies unrelated to the company's mainstay businesses.
Olympus at first denied any wrongdoing but later acknowledged it hid 117.7 billion yen ($1.5 billion) in investment losses dating back to the 1990s.
Kyodo reported Thursday, citing unidentified sources, that Kikukawa, Yamada and Mori have told prosecutors that they were involved in the cover-up.
Kikukawa resigned from all posts at Olympus last year. The company is suing him and 18 other former and current executives for damages in the cover-up.
The scheme _ which came to light only because Woodford blew the whistle _ has raised serious questions about corporate governance in Japan, and whether major companies are complying adequately with global standards.
Olympus has carried out an internal probe, setting up an independent panel, and found that some executives were involved in the deception.
Woodford was fired in October after raising his concerns. He tried to make a comeback but gave up his fight after failing to win backing from major investors including Japanese megabanks.
Woodford, a British national and a rare foreigner to head a major Japanese company, had demanded the resignation of the entire board.
Prosecutors have been carrying out an investigation, and raided Olympus headquarters and Kikukawa's home last year.
Olympus barely met its mid-December deadline to avoid being removed from the Tokyo Stock Exchange by filing corrected earnings for the April-September first half and for the past five fiscal years. Its stock has plunged. On Thursday, Olympus stock fell 2.4 percent to 1,273 yen in Tokyo.
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