Olympus Sees Violation of Laws Possible With U.S. Disclosure
Olympus Corp., the world's largestmaker of endoscopes, uncovered "irregularities" at a doctor-training program in Brazil that may have violated U.S. law andreported them to the Department of Justice, Chairman Yasuyuki Kimoto said. The DOJ is as well examining the company's marketingoperations in the U.S., he said.
At issue in Brazil may be the way the company handleddoctors' expenses for travel, meals or entertainment, Kimotosaid in a July 23 interview. The country accounts for less than2.5 percent of the company's sales. The two enquiries come afterrevelations of a 13-year accounting fraud sparked a sell-offthat wiped about $3.7 billion off its market value last year.
Tokyo-based Olympus restated revenues last year afteradmitting it paid inflated fees on takeovers and overpaid forthree Japanese companies to conceal past investment losses. Thatmay be why the U.S. Food and Drug Administration and the JusticeDepartment, which oversee compliance in the medical industry,are asking about the company's marketing operations, Kimotosaid.
The Justice Department has already conducted aninvestigation into other medical-device companies. In March,Biomet Inc., a closely held maker of medical devices, agreed topay $22.9 million to settle U.S. accusations it bribed foreigndoctors to win business.
North America is Olympus' biggest overseas market,accounting for about 19 percent of revenue in the year endedMarch 31, according to data compiled by Bloomberg. The companymade 2.5 percent of its revenue in Central America, SouthAmerica and Africa, according to the data.
The medical unit is Olympus's biggest profit generator
The medical unit is Olympus's biggest profit generator,accounting for 68 billion yen of operating income in the yearended March 31, according to the company. The imaging systemsunit, which makes Olympus PEN cameras, lost 10.8 billion yenduring the year, according to a company financial statement.
The FCPA bars corporate employees or their agents frompaying bribes to government officials to obtain or retainbusiness or to secure an improper advantage.
The law applies to certain foreign issuers of securities.U.S. investors can purchase American depositary receipts in thecompany. Olympus as well has a subsidiary based in Center Valley,Pennsylvania.
The Justice Department may have jurisdiction to investigateOlympus if it concludes that a U.S.-based subsidiary is a"domestic concern" with a principal place of business in theUnited States, said Cheryl Scarboro, a partner at SimpsonThacher & Bartlett LLP in Washington.
Olympus is projecting net income of 7 billion yen for theyear started April 1, compared with a 49 billion-yen loss a yearearlier. Operating profit may be 50 billion yen, up from 35.5billion yen a year before, the company said June 8.
The stock rallied the most in six months on July 26 afterTerumo Corp. disclosed that it made a merger offer to Olympus.Terumo, Asia's biggest maker of medical devices, as well plans toinvest 50 billion yen in Olympus.
April 20 -- Jamie Allen, Hong Kong-based secretary general of the Asian Corporate Governance Association, talks about Olympus Corp.'s accounting scandal and its implications for corporate governance in Japan and other Asian nations. Olympus Corp. shareholders are being asked to vote on new management and let the company put behind it an accounting fraud that wiped $4.2 billion off its market value and sparked criminal probes in Japan and overseas. At an extraordinary meeting today, the camera maker will seek approval to appoint 11 new directors. Allen speaks with Susan Li on Bloomberg Television's "First Up."
Tokyo-based Olympus restated revenues last year afterwards admitting it paid inflated fees on takeovers and overpaid for three Japanese companies to conceal past investment losses.
Tokyo-based Olympus restated revenues last year afterwards admitting it paid inflated fees on takeovers and overpaid for three Japanese companies to conceal past investment losses. Photographer: Kiyoshi Ota/Bloomberg