TOKYO (Reuters) ? Japanese prosecutors are set to question a former president of disgraced Olympus Corp over an accounting scandal engulfing the firm, as investigators probe for possible involvement of organized crime, media reports said on Friday.
Former Olympus president Tsuyoshi Kikukawa, who quit on October 26, and two others face voluntary questioning as early as this weekend, Kyodo news agency reported.
Olympus, a once-proud maker of cameras and medical equipment, has admitted to hiding losses for decades through improper accounting, but it has yet to disclose the extent of this concealment and what writedowns it will now need to take.
Olympus President Shuichi Takayama has blamed Kikukawa, who quit on October 26, Vice-President Hisashi Mori and internal auditor Hideo Yamada for the cover-up, and said he would consider criminal complaints against them. Mori has been fired and Yamada has offered to resign.
The New York Times reported that Japanese officials are investigating an apparent $4.9 billion hole in the accounts of Olympus as well as possible involvement of organized crime.
"Olympus made payouts amounting to many times the losses it sought to hide, and investigators suspect much of the additional money went to crime groups," the New York Times said, citing a memo prepared by investigators.
The memo says authorities want to find out if Olympus worked with crime syndicates to obscure the losses and paid them huge sums of money for their help, the newspaper said.
The memo had been circulated at a recent meeting of officials from Japan's Securities and Exchange Surveillance Commission (SESC), the Tokyo Prosecutors Office and the Tokyo Metropolitan Police, the paper said.
A Tokyo police spokeswoman confirmed that a probe of Olympus was under way but declined to give details. The Tokyo prosecutors office and the SESC declined comment.
Olympus declined comment on the media reports.
Links between companies, "yakuza" gangsters and politicians have a long tradition in Japan and authorities have been trying to crack down for decades, most recently with laws targeting not only crime syndicates but firms that do business with them.
The New York Times quoted the memo as saying Olympus had paid a total of 481 billion yen ($6.25 billion) through questionable acquisition payments, investments and advisory fees stretching from 2000 to 2009, but only 105 billion yen ($1.36 billion) had been booked in its financial statements, leaving 376 billion yen ($4.88 billion) unaccounted for.
FUNDS HARD TO TRACE
So far, Olympus has admitted to improperly accounting for only part of $1.3 billion in payments linked to mergers and acquisitions going back to 2006, though an independent panel commissioned by the firm to investigate the matter was still trying to get to the bottom of the issue.
A large share of these payments went to obscure Cayman Islands firms, making its difficult to trace the money.
Olympus said in a statement on Thursday that former vice president Mori had told the company none of the funds involved in the cover-up scheme had gone to "anti-social forces" -- a Japanese euphemism for gangsters -- but the firm was awaiting results of an independent panel appointed by Olympus to investigate the affair.
The panel report is due out in early December.
Olympus has lost more than 70 percent of its market value since the scandal broke last month, though investors had begun to hope the firm could avoid being delisted from the Tokyo Stock Exchange. Olympus shares were down 11 percent after the Kyodo report, extending earlier losses.
Delisting would effectively cut Olympus off from equity capital markets, constraining its funding and making it harder for its lenders to keep supporting the firm in its battle to avoid having to sell off its core businesses.
Proof that organized crime was involved could force the Tokyo exchange to delist the firm. It would also make it hard, if not impossible, for banks to make fresh loans to Olympus.
"If a company is found to have problems, like the involvement of anti-social forces, banks are not able to give support," Katsunori Nagayasu, chairman of the Japanese Bankers Association and president of Mitsubishi UFJ Financial Group, the country's biggest bank, said on Thursday.
Lawyer Shin Ushijima, a former prosecutor, said organized crime involvement at first blush appeared unlikely but could not be ruled out, if gangsters had gotten wind of the loss cover-ups and sought payments to stay silent.
"I don't think it is likely, but we cannot deny it (the possibility)," he said. "If the yakuza got some information, it means that someone spoke about it and that is very unlikely."
Other experts say gangsters often begin by blackmailing an executive or company over one scandal and then push for more money to keep that original payoff a secret.
($1 = 76.985 Japanese Yen)
(Writing by Linda Sieg; Editing by Mark Bendeich and Alex Richardson)
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