Yakuza Crackdown Could Derail Effort to Keep Olympus Listed

TOKYO, KOMPAS.com - Japanese police eager to show they are tough on organised crime could derail regulators’ efforts to save disgraced Olympus Corp from the devastating blow of delisting, raising the chances its core business will be bought out by a rival.

Japan’s securities watchdog, prosecutors and police, including a unit of the Tokyo police department’s organised crime division, are probing the firm after it admitted this month to hiding investment losses for decades through improper accounting.

Olympus said on Monday that a third-party panel the firm appointed to look into the affair had found no criminal participation in its M&A deals, nor had any funds flowed to “anti-social forces”, a Japanese euphemism for organised crime syndicates or “yakuza” gangsters. But the scandal coincides with stepped-up efforts by police nationwide to break the shadowy ties that have for decades bound the crime syndicates and companies.

“The police want a high-profile bust to show the new law has teeth and that they are serious about implementing it,” said Nicholas Smith, head of equities strategy at CLSA in Tokyo.

“The regulators, on the other hand, want to make sure the company stays in business. “The risk in all this is that a major listed company gets delisted, credit lines are pulled, people lose their jobs and a good, viable business disappears. Understandably, that’s probably one of the last things that they (regulators) really want to happen,” he said.

Analysts have said that Olympus’ big and profitable medical equipment business could eventually be an attractive target for a rival firm or a private equity fund once the dust settles. Internecine rivalry among authorities is also complicating the outlook for Olympus. Tokyo police, experts say, are keen to muscle in on the investigation as part of a rivalry with prosecutors, who normally take the lead in such cases.

“A negotiated, face-saving solution seems unlikely for anyone involved,” said Jesper Koll, head of equities research at JPMorgan in Japan. Olympus shares at one point fell some 80 percent after the scandal broke last month after axed British CEO Michael Woodford urged the company to come clean on murky acquisition deals.

The stock has rallied since Nov. 11, following news that Japan’s securities watchdog might make an example of Olympus executives found responsible for the scam, and recommend charges against them, but urge only slapping the company with a fine.

That outcome could make it easier for the 92-year-old firm to remain listed on the Tokyo Stock Exchange, easing the pain for shareholders and lightening the gloom for Olympus, whose leading share and technological edge in the global endoscope market are a matter of pride for the country. Makin a splash

Major foreign shareholders have already urged the exchange to keep Olympus listed. “We believe that shareholders have already suffered enough due to the actions of Olympus executives and that a delisting would unfairly punish them and other stakeholders further,” the Asian Corporate Governance Association, whose members include institutional investors that collectively manage assets of more than $10 trillion, said in a letter to the TSE last week.