Japanese authorities may take weeks to make any arrests over the accounting scandal at Olympus Corp, though initial findings by an investigative panel of experts are due to be released in days, lawyers said.
The panel, set up by Olympus after the scandal broke in mid-October, is due to report its findings in early December, likely paving the way for criminal complaints against former executives, the lawyers said.
Even if criminal complaints are filed against former executives or others involved in the scam, which dates back two decades, arrests might not take place by end-year.
This is partly to allow both suspects and prosecutors to spend the new year's holidays at home, since the turn of the new year is Japan's biggest traditional holiday, akin to Christmas in the West. Suspects can be held for a total of 22 days before either being indicted or released.
I think it would be hard to make arrests in early December and after December 10, they won't take people into custody, said lawyer Yasuyuki Takai, a former prosecutor. It's the turn of the year.
The panel is unlikely to recommend criminal complaints against individuals, preferring to leave that to the company, though it would look at whether improper or illegal acts had been committed, a source familiar with the panel told Reuters.
Olympus, a 92-year-old maker of cameras and medical equipment, has lost more than half its market value since the scandal erupted, and it now risks being delisted from the Tokyo stock market and being broken up or taken over.
Usually, a third-party panel does not go so far as to write who had legal responsibility. That is something that the company should consider from a separate perspective, the source said.
Bowing to pressure from institutional investors, Olympus this month appointed a panel headed by a former supreme court judge to look into the M&A deals at the core of the scandal.
Tokyo police, prosecutors and Japan's markets watchdog, the Securities and Exchange Surveillance Commission (SESC), have also launched an investigation of the scandal at Olympus.
The firm has so far admitted to using murky acquisitions to hide investment losses stretching back to the 1990s and estimated by media at hundreds of millions of dollars.
Olympus President Shuichi Takayama told employees in mid-November that the company would pursue legal action, including possible criminal complaints, against any executives or former executives that the panel found responsible for the scandal.
Takayama, who took over after the scandal surfaced, has pointed the finger at former president and chairman Tsuyoshi Kikukawa, former executive vice president Hisashi Mori and former corporate auditor Hideo Yamada.
Lawyers said the SESC was likely to wait for the third-party panel to complete its report before taking any official action itself, but might move first if it felt the panel was dawdling.
Possible charges include falsifying financial statements, fraud and aggravated breach of trust -- an offence that can include embezzlement -- although proving breach of trust would be difficult because of the need to show that the offence had been committed for personal gain, lawyers said.
Japanese media have quoted Kikukawa as saying he had only learned of the cover-up long after becoming president in 2001, while Mori and Yamada reportedly told the panel they had started shifting losses off-shore from 2000.
The three could not be reached for comment.
Prosecutors, meanwhile, are expected to think twice before charging the company itself with breaking the law, due to worries about fallout for shareholders and a sense that the once-venerable company should not be brought to its knees by being delisted from the Tokyo Stock Exchange.
What is most problematic for prosecutors are cases where, if they don't press charges, the company stays listed but if they do press charges, it might be delisted, said ex-prosecutor Takai.
It would be a very painful decision. If I were the prosecutor, I might not press charges (against Olympus) because the impact would be too great for shareholders, added Takai, who was a lawyer for Internet entrepreneur Takafumi Horie in a fraud case in which his firm Livedoor was charged in 2006.
Horie's aggressive takeover battles and high-flying lifestyle had rattled staid corporate Japan, while his firm lacked the decades-long history of the blue-chip Olympus.
A source familiar with the official investigation has said the SESC might also recommend criminal charges against the former executives but merely suggest fining the company, making it easier to remain listed.
Speculation about possible involvement of organized crime syndicates, however, is complicating the outlook for Olympus, since proof of such dealings would make delisting more likely.
Takai said he doubted any Olympus executives had knowingly paid off gangsters. But when something like this happens, it is common for yakuza and dishonest people to gather just like ants gathering around honey, he said.
Others, however, said yakuza involvement might run deeper.
How did the former securities guys (involved in the M&A deals) explain why they needed that big amount of money? You have to explain that actually, there is another pocket here, said former prosecutor-turned-lawyer Shin Ushijima.
Olympus shares have rallied in the past three weeks on hopes it can avoid delisting. The firm sought to reassure investors on Wednesday it would meet a December 14 deadline for ironing out its accounts -- a deadline it must meet in order to remain listed.
(Additional reporting by Reiji Murai; Editing by Mark Bendeich)