by Hiroko Tabuchi Tokyo
THE arrests of seven people accused of involvement in the $US1.7 billion accounting scandal at Olympus, including the company's former chairman and executive vice-president, point to a widening investigation into a cover-up ostensibly carried out by top management with the help of a group of former bankers.
Tsuyoshi Kikukawa, who was the company's chairman until the scandal broke last year, was arrested in Tokyo, as were two other former executives, on suspicion of having falsified financial statements.
Two former Nomura investment bankers, who had been mentioned previously by investigators, were also taken into custody, accused of violating securities laws, and so were two of the bankers' associates.
By aiming a spotlight on what critics say is Japan's lax corporate governance, and casting a shadow over one of the country's former blue-chip companies, the Olympus scandal has become a test of how far Japan is willing to go to fight white-collar crime.
The former Olympus executives arrested, besides Kikukawa, according to the prosecutor's office, were Hisashi Mori, the former executive vice-president, who was sacked after the scandal broke; and Hideo Yamada, a former internal auditor, who resigned in the scandal's wake.
The Japanese authorities also arrested two former Nomura bankers, Akio Nakagawa and Nobumasa Yokoo, who ran Global Co, an investment firm.
The firm's receipt of hundreds of millions of dollars in advisory fees from Olympus in the early 2000s, according to investigators, raised questions that eventually led to the accounting fraud being detected.
Two men who authorities described as the bankers' associates, Taku Hada and Hiroshi Ono, were also arrested. Both had served on the board of Global.
Efforts to reach lawyers for the arrested executives for comment were unsuccessful.
The irregular accounting came to light in October after Olympus fired Michael Woodford, a Briton who was its president and chief executive. At the time, Kikukawa, still the chairman, attributed the dismissal to Mr Woodford's aggressive Western management style.
But Mr Woodford went public, saying he had been sacked for questioning payouts made by the company from 2006 to 2008, and he provided what he said was evidence to the news media.
Investigation by securities and law enforcement agencies in Japan, Britain and the US ensued, as did an internal inquiry by an outside panel hired by Olympus.