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Ex-banker arrested in U.S. over Olympus fraud

Source: Thomson Reuters Foundation - Fri, 21 Dec 2012 03:33 GMT
Author: Reuters
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* Chan Ming Fon to appear in U.S. federal court on Friday

* U.S. authorities say he was paid ${esc.dollar}10 million for role in fraud

* ${esc.dollar}1.7 bln fraud started in 1990s, Olympus admits improper accounting

* Three former executives have pleaded guilty to fraud

By Erin Geiger Smith

Dec 20 (Reuters) - A former Singapore banker was arrested in Los Angeles on Thursday and accused of helping "liquidate" hundreds of millions of dollars in the Olympus Corp accounting scandal, one of the biggest corporate frauds in Japan's history.

Chan Ming Fon, who resides in Singapore and is a citizen of Taiwan, is the latest former executive to become ensnared in the ${esc.dollar}1.7 billion accounting cover-up at the camera and medical equipment maker.

Three former Olympus executives pleaded guilty over charges related to the fraud in September, and the company has also admitted it used improper accounting to conceal massive investment losses under a scheme that began in the 1990s.

Court papers said Chan was paid ${esc.dollar}10 million by Olympus or entities controlled by Olympus for his role in the decade-long fraud.

He is charged with one count of conspiracy to commit wire fraud, which carries a maximum penalty of 20 years.

Olympus declined to comment. Chan's family in Singapore could not be reached for comment.

Chan, 50, was interviewed by the Federal Bureau of Investigations (FBI) this week, and was being held in custody on Thursday night ahead of scheduled appearance on Friday in a federal court in Los Angeles, U.S. authorities said.

"The defendant had a direct role in the secret liquidation of hundreds of millions of dollars of Olympus investments. He then waged a six-year campaign to conceal that misdeed by lying, certifying to auditors that the investments still existed years after liquidation," said FBI Assistant Director-in-Charge George Venizelos.

The accounting fraud at 93-year-old Olympus was exposed in October 2011 by chief executive Michael Woodford, who was fired after he questioned dubious deals that were later found to have been used to hide losses.

The three former executives who pleaded guilty had been identified by an investigative panel, commissioned by Olympus, as the main suspects in the fraud seeking to delay the reckoning from risky investments made in the late-1980s bubble economy.

Former chairman Tsuyoshi Kikukawa, former executive vice president Hisashi Mori and former auditor Hideo Yamada pleaded guilty to charges that they inflated the company's net worth in financial statements for five fiscal years to March 2011. They are awaiting sentencing.

Revelations of the huge accounting fraud have revived calls for more outside scrutiny of its boardrooms but have failed to trigger sweeping corporate governance reforms similar to those introduced a decade ago in the wake of U.S. scandals such as at Enron.

TRAIL OF INTRIGUE

In 2005, Chan established an entity in the Cayman Islands called SG Bond Plus Fund, the complaint said.

Until about 2010, Chan submitted false and misleading documents to Olympus' outside auditor regarding hundreds of millions of dollars' worth of assets purportedly maintained by Chan at SG Bond for the benefit of Olympus, it said.

Chan had actually transferred the assets to a British Virgin Island-based entity controlled by Olympus, the complaint said.

The case is filed in federal court in New York.

An investigative panel report, commissioned by Olympus last year, mentioned a banker referred only by his last name Chan as an outside collaborator who first met Olympus executives Yamada and Mori in 1998.

At the time "Chan" was working at Commerzbank in Singapore, but resigned in 2000. After leaving Societe Generale in 2004, the report said Chan formed his own company where he continued to work for former Olympus executives.

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