Olympus Corp. said it hid losses by paying inflated fees to advisers on the 2008 acquisition of Gyrus Group Plc, the first admission of wrongdoing from the Japanese camera and medical-equipment maker since accusations from its former chief executive officer surfaced four weeks ago.

Executive Vice President Hisashi Mori was dismissed over his role in the cover-up, the Tokyo-based company said in a statement Tuesday. The stock plunged by the daily limit after an independent panel Olympus appointed last week found three other takeovers were used to hide soured investments from the 1990s.

Allegations by Michael C. Woodford after he was axed as CEO on Oct. 14 had wiped more than half the value from the company’s stock before Tuesday. Olympus funneled more than $600 million in fees on the $2 billion Gyrus takeover to offshore funds to cancel impairments that the company had kept off its books, the statement said. Only last week, Olympus denied there was anything illegal about its acquisitions.

“The investigation must continue to determine how much rot there is,” said David Herro, chief investment officer of Harris Associates LP. “All responsible must, at a minimum, leave. Also, since the management’s credibility is nearly nonexistent, all of what they say must be verified.”

Woodford should return to run the company, Herro said in an e-mailed comment to Bloomberg News. Harris held 10.9 million Olympus shares as of June 30, a 4 percent stake that makes it the company’s second-biggest overseas investor.

“They need to start rebuilding the company,” Woodford said in a phone interview Tuesday. “I’d have to see what shareholders are saying and consider very carefully what to do next.”

Olympus’ third president since Woodford was axed, Shuichi Takayama, will meet the press at 12:30 p.m. in Tokyo. Former Chairman and President Tsuyoshi Kikukawa, who had Woodford removed, resigned on Oct. 26 as investors increased pressure for a review of the deals. Kikukawa denied any wrongdoing when he stepped down and said he intended to stay on the board.

Olympus, the world’s biggest maker of endoscopes, plunged 29 percent at the open in Tokyo trading. The stock has lost almost 70 percent of its value since Oct. 14.

The company set up a six-person independent investigation, including two former judges and a retired prosecutor, to probe the $1.4 billion of writedowns and fees related to acquisitions.

Olympus paid a total of 73.4 billion yen ($940 million) to increase stakes in Altis Co., News Chef Co. and Humalabo Co. between 2006 and 2008, which was also used to hide losses, it said Tuesday. Olympus wrote down 55.7 billion yen, or 76 percent of the acquisition value, in March 2009, the company said in a statement Oct. 19.

Olympus last week said the acquisitions of three Japanese companies unrelated to its main operations were part of an attempt to diversify earnings.

After being fired, Woodford went public with his concerns raised with Kikukawa and Mori over $687 million paid in advisory fees in the $2 billion acquisition of U.K. medical-equipment company Gyrus and the writedowns. All the transactions involved payments to Cayman Islands companies or special purpose vehicles whose beneficiaries are not known.

The U.S. Federal Bureau of Investigation is probing the allegations, according to Woodford. Olympus is also under scrutiny of Japanese regulators, officials said. (Bloomberg)

The probes center on more than $600 million in fees paid to AXAM Investments Ltd., a now-defunct Cayman Islands fund connected to U.S.-based Japanese banker Hajime Sagawa.

Mori, a key official involved in the Gyrus takeover according to U.K. company records, on Oct. 27 declined to name the person who introduced Sagawa to Olympus.

Repeated attempts to reach Sagawa at his registered address in Boca Raton, Florida, have been unsuccessful, as have efforts to trace the owners of Cayman entities paid for the three other acquisitions.

“The money went to those shareholders,” Mori said at the Oct. 27 briefing in Tokyo. “We have no idea who they are.” 

(Bloomberg)