Japan's scandal-ridden Olympus Corp decided on Wednesday to set up an outside panel to advise on whether it should take legal action or make criminal complaints against those who cooked the firm's books, Kyodo news agency said.

The news follows the release on Tuesday of the findings of a separate investigative panel, which concluded that several former Olympus executives spent 13 years on a $1.7 billion scheme to hide losses off the company's balance sheet.

Kyodo said the new panel, to be made up of external legal and accounting experts, would consider the actions of former and current executives, including Shuichi Takayama, current president of the maker of cameras and medical equipment.

Olympus, which still risks being delisted from the Tokyo stock market and forced into a humiliating sale of core assets, is due to hold a news conference at 0600 GMT.

The Olympus board, already battling to maintain credibility after one of Japan's biggest accounting scandals erupted on its watch two months ago, faces a delicate task in pursuing wrongdoers.

Made up almost entirely of directors who served during Olympus's 13-year cover-up of investment losses, the board was publicly trashed in Tuesday's report but it remains in charge until shareholders can agree on a new team.

Tuesday's report, also prepared by outside legal and accounting experts, described Olympus management as rotten to the core, citing a desire to flatter financial performance and a culture of absolute corporate loyalty.

The board, which has been thinned out by resignations since the scandal broke in mid-October, vowed to take tough action -- though it knows that its own days are numbered, with investors expecting all existing directors to eventually quit.

The company takes very seriously the results of the (panel's) investigation and its recommendations, and it is considering further fundamental measures to restore confidence as soon as possible, Olympus said after the panel's report.


Kyodo said the new panel would also consider the possibility of seeking damages from those responsible for the cover-up.

Olympus President Takayama has already said the firm will consider legal steps, including criminal complaints, against those found responsible and he has already blamed two former top executives for masterminding the cover-up.

The pair, former executive vice president Hisashi Mori and ex-internal auditor Hideo Yamada, was also found by the panel to have engineered the concealment, starting in 1998. Two former presidents were also made aware of it, the panel found.

One of the very few glimmers of hope from the panel's report was its conclusion that there was no evidence of a much-rumored link between the scandal and organized crime.

If a link were to be found -- and police are still investigating this aspect in a separate inquiry -- Olympus would be likely to be delisted from the Tokyo stock market, a humiliation that could force it to sell its core businesses.

Olympus shares have lost about half their value since its sacked chief executive, Michael Woodford, blew the whistle on the accounting problems, and the stock sank further on Wednesday on fresh doubts over the firm's struggle to remain listed.

The stock fell as much as 9 percent, with investors now focused on whether Olympus can meet a December 14 deadline to report its second-quarter results and reveal the size of the restatement required to iron out its accounts.

Even in the absence of any link to organized crime, Olympus would be delisted if it failed to meet the reporting deadline. And even if it met the deadline, it could still be dumped from the exchange of its accounting misstatements were large enough.

The third-party panel report was as expected. The real issue is now with the Tokyo Stock Exchange (TSE), said Hajime Nakajima, wholesale trader at Cosmo Securities in Osaka.

To regain confidence, the TSE has to make a decision. Otherwise it will be seen as a problem for the entire market.

Adding to the uncertainty is the question of Olympus's leadership, with CEO-turned-whistleblower Woodford campaigning to unseat the current board and to install his own team of candidates, with himself at the helm as nominated CEO.

Takayama has said current management is willing to step down at the appropriate time, once Olympus is back on track.

(Reporting by Mari Saito; Writing by Mark Bendeich; Editing by Linda Sieg)