* Ex-president Kikukawa, two other former execs arrested
* Four others arrested, including two ex-bankers
* Investor focus more on who will run co., possible tie-ups
* Olympus shares slide 2.4 pct vs 0.3 pct dip in TOPIX
* Arrests mark 'a day to remember' - ex-CEO Woodford
(Adds new quotes from Woodford)
By Mayumi Negishi and Nobuhiro Kubo
TOKYO, Feb 16 Japanese police and
prosecutors have arrested seven men, including the former
president of Olympus Corp and ex-bankers over a $1.7
billion accounting fraud -- one of the country's biggest
Tokyo prosecutors arrested ex-president Tsuyoshi Kikukawa,
former executive vice president Hisashi Mori and former auditor
Hideo Yamada on suspicion of violating the Financial Instruments
and Exchange Law, officials said on Thursday.
Also apprehended were former bankers Akio Nakagawa and
Nobumasa Yokoo and two others suspected of helping hide huge
investment losses through complex takeover deals at the
endoscope and camera maker.
The three former executives 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.
The scandal was exposed in October by chief
executive Michael Woodford, who was sacked by the Olympus board
after querying dubious deals later found to have been used to
conceal the losses. Woodford campaigned to win his job back, but
gave up that bid last month, blaming cosy ties between
management and big Japanese shareholders and citing the strain
on his family.
"After going to hell and back, this is a day to remember,"
Woodford said in an email on Thursday.
But he told a hastily-called London news conference that
many questions remained unanswered. "These were huge amounts of
money and we need to understand to what extent the banks were
involved," he noted. "We've come a long way, but I don't think
we are at a point at which we have closure."
The Briton, who was a rarity as a foreign CEO in Japan,
plans to write a book about how he uncovered the scandal.
The arrests come as investors focus on who will run the
once-proud company when its management steps down at an April 20
shareholders meeting, and whether Olympus will seek a capital
tie-up to fix its balance sheet.
TAKING THE HELM
Olympus is banking on that April meeting marking a turning
point in the scandal, with at least six of its 11-member board,
including current president Shuichi Takayama, set to resign.
His successor is likely to be one of three board members the
panel said were not responsible for the cover-up -- Masataka
Suzuki, Kazuhiro Watanabe and Shinichi Nishigaki -- said a
source familiar with the matter, who did not want to be
identified due to the sensitivity of the issue.
"The arrests of former executives won't impact possible
tie-ups with Terumo, Sony, Fujifilm
and others," said a sell-side equity manager at a Japanese firm,
who did not want to be named as he is not authorised to talk to
"Olympus continues to be very attractive to other companies
because of its endoscope business."
Last year the investigative panel alleged that Kikukawa,
Mori and Yamada had played leading roles in a 13-year scheme to
hide the losses, and they are among 19 executives Olympus is
suing over the scandal.
The panel said it found no evidence of involvement by
organised crime, despite speculation that "yakuza" gangsters
were somehow involved in the cover-up scheme.
An Olympus spokesman said the company would cooperate fully
with the investigative authorities. It is also under
investigation by law enforcement agencies in Japan, Britain and
the United States.
Kikukawa's condominium house was among 20 sites raided in
December by prosecutors.
Nakagawa, who began his banking career at Nomura
Securities, was a founding member of the Axes group, which was
awarded a huge $687 million advisory fee for Olympus's
acquisition in 2008 of UK medical equipment firm Gyrus that was
at the heart of the scandal.
Yokoo, another ex-Nomura banker, ran a consulting
firm, Global Company, which was hired by Olympus in 2000 to
scout for new businesses and steered investment into three small
money-losing Japanese firms.
Olympus in December filed five years' worth of
corrected financial statements plus overdue first-half results,
revealing a $1.1 billion dent in its balance sheet, triggering
talk it would need to merge or forge a business tie-up to raise
On Monday it forecast a $410 million full-year loss due
largely to its ailing camera operations, but its core endoscope
business appeared unscathed by the scandal, and its president
said the firm might not need outside capital.
Olympus's shares closed down 2.4 percent at 1,273 yen on
Thursday, while the overall Tokyo market index slipped
0.3 percent. Shares in Olympus, currently worth around $4.5
billion, have halved in value since the scandal unfolded.
($1=78.3350 Japanese yen)
(Additional reporting by Mari Saito and Tim Kelly, Writing by
Linda Sieg and Chris Gallagher; Editing by Ian Geoghegan)