The U.K. Serious Fraud Office (SFO) has dropped a two-year case against Japan-based endoscope maker Olympus Corp in light of a London court ruling that misleading auditors is not seen as a criminal offence under English law.
In September 2013, the SFO charged Olympus and its U.K. subsidiary, medical systems company Gyrus Group for making false statements to an auditor. In this case, the SFO could not have prosecuted the individuals involved in the misconduct since Japan does not extradite its nationals, the regulator said.
The SFO said it began investigating the allegations in November 2011 after former Olympus CEO Michael Woodford blew the whistle on a $1.7 billion accounting scandal where Olympus made suspicious payments between April 2010 and March 2011. Several Olympus executives managed losses in off-balance-sheet entities and concealed them providing misleading statement to auditors, according to an internal investigation.
In February, London’s Court of Appeal ruled that “English law does not criminalise the misleading of auditors by the company under audit.” As a result, the SFO decided on Tuesday to “offer no evidence” against Olympus and Gyrus Group.
A Reuters article said that the Court of Appeal decision is a major setback for the SFO as Director David Green has been putting the law to test so more companies can be held accountable for their actions.
In 2008, Olympus bought Gyrus for $2 billion, which went down in history as the world’s largest advisory fee and later wrote down the value of the deal along with a string of other acquisitions. The deal was part of Olympus’ scheme to conceal years of investment losses.