I previous mentioned the arrest of 7 former officials and advisors in the Olympus fiasco. Also mentioned that I did not know what the arrests mean in the context of the Japanese legal environment.
The Wall Street Journal article Arrests Go Beyond Olympus provides me some context. (Article behind paywall, so grab your copy of Friday’s WSJ before you toss it. Better yet, get an online subscription.)
It would seem that the prosecutors are seriously pursuing the case.
That the authorities arrested advisors and consultants to Olympus, and not just former employees, seems to be an expansion in the investigation.
The reporters, Kana Inagaki and Phred Dvorak describe the broader context:
Based on Thursday’s arrests and the independent panel’s December report, it appears that investigators are looking into whether anyone helped Olympus executives hide the losses and if so, how much they were paid for their services and whether they had other criminal ties. Investigators also apparently are looking at how the arrangement worked, how many people at the company were involved and whether the losses were limited to those Olympus has revealed.
Potential penalties include some serious jail time. From the article:
The maximum penalty for violation of the Financial Instruments and Exchange Law, under which they were arrested, is 10 years in prison or a fine of ¥10 million, roughly $125,000.
However, in the Japanese legal and cultural environment, jail time is unlikely, assuming they were to be convicted. The article concludes:
Japanese executives convicted of white-collar crimes often have been given suspended prison sentences, although former Internet mogul … last year began serving a two-and-a-half-year prison term for accounting fraud. He has maintained his innocence. [Note: name redacted because it’s not relevant for this post.]