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Questionable acquisitions

In the early 1990s, Yamaichi Securities was Olympus' main broker, but went bankrupt after accumulating ¥260 billion in tobashi investment losses. In 1998, Nomura succeeded as Olympus' main broker. Prompted by the Yamaichi collapse, new "mark to market" accounting rules were made mandatory in 1999, from which time companies were obliged to disclose losses on their securities investments in a timely manner.[28] Thomson Reuters reported that a fee of US$687 million, equal to 31 percent of the acquisition price, was paid to a middle-man, whereas this is usually 1–2 percent.[19][20] As part of his proof, Woodford released the report from PwC which showed that the sum of $670 million of the advisory payments was paid over to AXAM Investments Ltd., a Cayman Islands company. In June 2010, three months after receiving its final fees from Olympus, it was struck off by local company registry for non-payment of license fees.[18] Olympus revealed that the Axes fee included fees paid to Perella Weinberg Partners UK, who acted as financial advisor, and US law firm Weill, Gotshal & Manges, who acted as legal advisers.[29]

The Telegraph said it has seen documents indicating a "Mr Sagawa" was a director of Axam Investments and Axes America that received a $687 million advisory fee for the Gyrus acquisition.[30] The Financial Times said its principals were former Nomura employees.[31] The link to the scam caused Nomura shares to fall, though the bank denied involvement, claiming it was "based on speculation and not on fact".[28] Akio Nakagawa and Hajime Sagawa, both of whom started their careers at Nomura Securities and were also colleagues at Drexel Burnham Lambert and PaineWebber, were behind Axes, according to Reuters.[32] Nakagawa, who was once head of equities at PaineWebber in Japan in the early 1990s, had long-standing relationship with Olympus.[32] A former Paine Webber banker attested that Nakagawa and Sagawa were handlers for Olympus, and they made use of Bermuda-based funds valued at "hundreds of millions of dollars" to manage its balance sheet using Japanese accounting loopholes.[33] Axes America, having negotiated the success fee for Gyrus in a combination of cash and stock, then transferred the stock component to AXAM Investments, an affiliate registered in the Cayman Islands.[32] In 2010, the stock was sold back to Olympus for $620 million.[32]

Nobumasa Yokoo, former banker who had dealt with Olympus when he worked for Nomura, is also cited as being behind certain other of the transactions under the spotlight. Having founded Global Company in the late 1990s, he persuaded Olympus to invest ¥30 billion in their venture capital fund in 2000.[31] In 2003,[1] Olympus made a piecemeal acquisition of an information technology group, ITX. Yokoo's older brother was chief financial officer for ITX. The elder Yokoo became a group executive officer after Olympus became majority owners. Nobumasa Yokoo also introduced three small, unprofitable companies in which he was shareholder and executive that Olympus acquired for ¥73.4 billion – News Chef, a maker of microwave cookware,[31] Altis and Humalabo. According to The Wall Street Journal (WSJ), Olympus acquired the companies from Cayman Island based funds between 2007 and 2010.[34] Nikkei Business reported informed sources deriding these as "shell companies".[15] Part of the transaction took place on 25 April 2008, when Olympus paid the equivalent of $177 million to funds named Dynamic Dragons II and Global Targets.[34] The WSJ noted that there were a large number of frequent and complex corporate changes (name and ownership) but determined from the paper trail that Dynamic Dragons II "was part of a network of elusive Japanese firms and financiers that often invested together, and whose ties and identities were constantly shifting." Kenji Takasago, associate professor at Kobe University suggested the complexity of the scheme was to obscure the money trail.[34]



Jake Adelstein, former crime reporter for the Yomiuri Shimbun, said these three acquired companies "shared addresses and office space with several other companies with different names but sometimes the same employees, creating a web of real and paper companies that make tracking the money very difficult." He also alleged that Japanese authorities considered one of the auditors involved "a corporate blood brother ... to the Yamaguchi-gumi."[29] Sankei Shimbun said there were perhaps 10 brokers involved in the acquisition schemes, and that while they "are not members of crime syndicates themselves ... [some] ... conduct economic activities together with antisocial forces ... There is the possibility that Olympus has supplied cash (to organised crime) as a result."[3] However, the investigatory panel set up by Olympus rejected reports the allegations that the acquisition funds could found their way to organised crime. Panel chairman Tatsuo Kainaka said "Our committee has confirmed no such facts in its investigations so far."[3]


Date: 2015-01-29; view: 879


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