Olympus Says It Is Unaware Of Probe
October 24, 2011 by UPI - United Press International, Inc.
TOKYO, Oct. 24 (UPI) — A spokesman for Olympus said the Japanese camera and medical equipment company was unaware the FBI was investigating its 2008 purchase of Gyrus Group.
Olympus is well known as a producer of digital cameras, but the bulk of its revenues comes from its more obscure medical equipment business, The New York Times reported Monday.
In 2008, it took over British firm Gyrus Group with advisement from two Japanese bankers, Hajime Sagawa and Akio Nakagawa, who set up their firm Axes America with an office in Stamford, Conn., and one in the Graybar Building near the Grand Central Terminal in New York City.
The Times describes the bankers as unassuming, unexciting, knock-about finance professionals who were just about to close up shop — with Nakagawa about to retire — when an old connection came to fruition.
One or more members of the board at Olympus hired Axes to consult on the deal and, when it was done, the two bankers, who earned a mediocre living from a Wall Street point of view, were suddenly very wealthy.
The firm received 5 percent of the deal’s $2 billion value, but were then remarkably given “a mixture of cash, share options and warrants,” a PricwaterhouseCoopers report on the deal said.
They ended up with fees amounting to $687 million or about 30 times the average fee for that kind of work, the Times said.
Normally, a firm would expect a fee of 1 percent of the deal. The fee in this case amounted to 36 percent of the value of the deal.
“This is such an extraordinary deviation from normal fees … . No one would have entered into this transaction if they were showing good business judgment,” said Jeffrey Manns, an associate professor at George Washington University Law School and an expert in securities law.
Olympus is now in chaos. It fired Chief Executive Officer Michael Woodford, who said he was close to exposing the incredible fee.
On Friday, the firm said its payments were “appropriate,” but also said it would begin an investigation of its mergers using an independent team.