The U.S. Federal Bureau of Investigation is probing the massive advisory fee paid by Japan's Olympus Corp in its takeover of a British company, a media report said, as the firm's shares continued to slide over the scandal.
The Japanese camera and endoscope maker abruptly dismissed its British chief executive, Michael Woodford, on October 14 only to see him turn whistleblower. He has revealed documents about huge payments made to advisers in the acquisition of medical-equipment maker Gyrus.
The FBI is investigating the $687 million advisory payment made in the $2.2 billion Gyrus takeover, the New York Times reported, citing two people briefed on the case. It said the exact focus of the investigation was not yet clear.
Woodford, a 51-year-old who spent three decades at Olympus, has identified the advisory firms involved in the takeover as New York-based AXES America LLC and AXAM Investments Ltd in the Cayman Islands.
Olympus has admitted making the payment, but has given no reason why it should have agreed to a fee that amounted to 36 percent of the value of the takeover.
Usually advisory fees are about 1 percent. The Gyrus fee is the largest on record paid for advice on an acquisition.
The Tokyo Stock Exchange, which can put highly volatile stocks under supervision, said on Monday that it is urging Olympus daily to disclose more information on financial adviser payments and will look carefully at any third-party probe on the case.
Shares of Olympus have more than halved since Oct 14 and closed the morning session on Monday down 12.3 percent at 1,080 yen after touching 1,012 yen, its lowest level since March 1998.
Traders are pointing to long-only investors deciding to sell following the report of an FBI probe and as more brokerages suspend ratings recommendation on the firm.
"Many players seem to expect it to fall to around 700-800 yen," said a trader at a Japanese brokerage. At 700 yen, it will be at about 10 percent above its book value.
Last week the company bowed to investor pressure and announced it was setting up an external panel of lawyers and accountants to probe its past M&A deals.
Harris Associates, a Chicago-based group which holds 2.5 percent of Olympus shares, gave the move a guarded welcome.
"We see it as a promising sign that Olympus has indicated it will appoint a panel to look into these acquisitions, but we'll reserve judgment until we hear more details, such as who will be on the panel, what they will specifically be investigating and how quickly they will get this done," said David Herro, Chief Investment Officer for International Equities.
"We think it's important that the panel members have no ties to Olympus, that they be given complete access to the company's books and records, and that they work quickly to get answers to our many questions about the company's M&A procedures, its decision-making processes, the services provided by outside consultants and why they were paid so much for those services."
In an interview with the Associated Press news agency at the weekend, Woodford said Olympus was moving too slowly and accused it of trying to sidestep questions about the fee paid when it bought medical equipment maker Gyrus.
Olympus, which denies any wrong-doing over the fee payment, has not given details on the identities of the advisers who earned the fee, other than acknowledging that the fees were paid to two obscure firms, AXES and AXAM Investments.
Woodford, who is now in Britain, has sent dossiers to British and Japanese authorities on the Gyrus payments. Olympus said it fired him after clashes over management style, while Woodford said he was dismissed for calling on senior executives to resign over excessive payments.