Japanese officials say that at least $4.9 billion is unaccounted for in a financial scandal at Olympus and are investigating whether much of that money went to companies with links to organized crime.
In a memo prepared by investigators and circulated at a recent meeting of officials from Japan’s Securities and Exchange Surveillance Commission, the Tokyo prosecutor’s office and the Tokyo Metropolitan Police Department, officials say they are trying to determine whether Olympus worked with organized crime syndicates to obscure billions of dollars in past investment losses and then paid them exorbitant sums for their services.
The memo — a copy of which was obtained by The New York Times from a person close to the official investigation — appears to link the Olympus losses for the first time to organized crime groups.
It also suggests that investigators believe illicit payouts from Olympus went far beyond the roughly $1.4 billion in merger fees and acquisition payments that have come under recent scrutiny, potentially making it one of the biggest scandals in Japanese corporate history.
Olympus, a maker of medical imaging systems and digital cameras, recently announced that an internal investigation had found that the company used a series of money-losing acquisitions to hide investment losses in the 1990s, keeping those losses off its books for decades. Olympus has said a panel of third-party experts is still tallying numbers on how big the losses were.
The company has said that all the transactions went toward masking losses. It has denied rumors that it sought the aid of Japan’s notorious organized crime syndicates, known as the yakuza, to help orchestrate a cover-up.
But according to the investigators’ memo, Olympus made payments amounting to many times the losses it sought to hide, and investigators suspect much of the additional money went to crime groups.
Olympus paid a total of 481 billion yen, or $6.25 billion, through questionable acquisition payments, investments and advisory fees from 2000 to 2009, according to the memo, but only 105 billion yen has been written down or otherwise accounted for in its financial statements. That leaves 376 billion yen, or $4.9 billion, unaccounted for, according to the memo.
The memo says investigators believe that over half of that amount has been channeled to organized crime syndicates, including the country’s largest, the Yamaguchi Gumi. The memo does not make clear whether Olympus knew about those links. But if confirmed by investigators, an association with organized crime could prompt a delisting of Olympus shares from the Tokyo Stock Exchange, under the exchange’s rules.
The memo suggests that Olympus may have been coerced by organized crime syndicates that knew about or helped with previous cover-ups to channel ever-increasing funds out of the company.
“Olympus was exploited over its cover-up totaling losses of 50 billion yen, and since 2000, over 200 billion yen has disappeared into the underground economy,” the memo said.
Olympus officials said Thursday that they had no immediate comment. On Oct. 26, when asked about the possibility of the involvement of “antisocial forces” in the scandal, a euphemism for organized crime, the president of Olympus, Shuichi Takayama, said, “I absolutely do not recognize this.” So far, three Olympus directors have been dismissed or have stepped down.
Questions were first raised about Olympus’s acquisitions in August in the Japanese magazine Facta. The scandal deepened in October after Olympus fired its chief executive, Michael C. Woodford, who said he was dismissed after questioning the company’s chairman and board about some of the payments.
Mr. Woodford said Thursday that he planned to return to Japan next week to speak with the authorities about the investigation. Mr. Woodford has also been cooperating in the United States with the F.B.I. and the Securities Exchange Commission, which are looking into the matter, as well as in Britain with its Serious Fraud Office.
At the heart of Olympus’s action is a once-common technique to hide losses called tobashi, which Japanese financial regulators tolerated before clamping down on the practice in the late 1990s.
Tobashi, translated loosely as “to blow away,” enables companies to hide losses on bad assets by selling those assets to other companies, only to buy them back later through payments, often disguised as advisory fees or other transactions, when market conditions or earnings improve.
The Japanese investigators’ memo chronicles Olympus’s efforts to pay off its previous losses through payments camouflaged as acquisitions and supposedly related advisory fees to buy companies that seemed to have little relation to its main business.
The memo confirms some information previously reported by The New York Times, which found that deal payments were largely made by the management consulting firm Global Company, headed by Nobumasa Yokoo, a former banker at the investment bank Nomura.
Also helping to arrange those deals, according to those news reports and the investigators’ memo, was ITX, a company acquired by Olympus in 2003 and formerly headed by Mr. Yokoo’s elder brother, Akinobu Yokoo.
The investigators say that in December 2005, ITX bought Tsubasa Net, a software maker, which the memo calls “a front company” known by the Japanese police to be affiliated with the Yamaguchi Gumi. ITX’s earnings report for that year shows it paid 16 billion yen ($208 million) for that acquisition.
Meanwhile, Olympus, being advised by Global Company, paid 73.4 billion yen ($953 million) to acquire three Tokyo-based companies — Altis, Humalabo and News Chef — between 2006 and 2008, and then quickly wrote off the investments. The memo identifies all three as front companies with links to organized crime.
And in 2008, when Olympus acquired the British medical equipment company Gyrus and paid 68.7 billion yen ($892 million) in adviser fees partly to a company incorporated in the Cayman Islands, some of those fees were transferred to investment funds with organized crime links, the memo said.
Neither Olympus nor the Yokoo brothers have been charged with crimes, but people with knowledge of the investigation who were not permitted to discuss it publicly say the Japanese authorities — including police, prosecutors and financial regulators — are pursuing possible offenses that include false accounting and aggravated breach of trust.
Akinobu Yokoo is president of an aviation parts and services company, Jalux, which said on Thursday that Mr. Yokoo would not be available to comment.
The Tokyo offices of Global Company were cleared out in early October.
At another company owned by Mr. Yokoo, a man who identified himself only as “Yamamoto” said Mr. Yokoo had not been seen “for some time” and had given instructions “not to speak to outsiders” about Olympus.
No one answered the doorbell at his registered home address in Tokyo, a tiled mansion fitted with tall fences and security cameras.