LONDON (Reuters) - Olympus (7733.T), the Japanese medical equipment and camera maker, is suing former CEO and whistleblower Michael Woodford in a multimillion-pound legal row over allegations of wrongdoing surrounding an executive pension plan.
Almost five years after Woodford lifted the lid on one of Japan’s biggest corporate frauds, his former employer is claiming more than 15 million pounds ($20 million) from him and a former colleague, alleging they conspired to maximize their pension benefits by unlawful means, according to court filings.
Woodford, Olympus’s first foreign chief executive, was fired two weeks into the job in 2011 after persistently querying unexplained payments worth around $1.7 billion and demanding the resignation of its former chairman and vice president.
He then alerted global authorities and the media. Olympus initially said Woodford was fired for failing to understand its management style and Japanese culture. But in September 2012 the company and three former executives pleaded guilty in Japan to cover-up charges.
Olympus’s KeyMed unit, a surgical products maker in southern England, has now filed a High Court claim against Woodford and Olympus veteran Paul Hillman alleging they breached their duties as directors and trustees of the defined benefit pension plan.
Woodford and Hillman, a former company director who resigned in 2011, deny any wrongdoing and say they acted at all times in accordance with their duties.
“Mr Woodford and Mr Hillman consider the claims against them to be completely baseless and look forward to taking the proceedings to trial and demonstrating what they consider to be the true motivations behind the claims by Olympus,” they said in a joint statement.
Woodford, who joined Olympus in 1981 and rose through its ranks to become CEO, has countersued Olympus. He alleges the case brought by KeyMed breaches a 2012 out-of-court settlement over his dismissal and is seeking damages “in the high seven figures”.
Olympus headquarters in Tokyo declined to comment.
Rudolf Muench, a Hamburg-based general manager at Olympus’s European headquarters in Germany, said KeyMed was only alerted to possible wrongdoing in 2014 when the “substantial value” of one of the pensions became known.
“KeyMed has a responsibility towards its stakeholders and therefore could not ignore the evidence that was presented,” he said in an email to Reuters.
In documents received by the court on Aug. 26 and seen by Reuters, Olympus said the 2012 full and final employment settlement with Woodford did not prevent further legal action when claims were based on “deliberate wrongdoing or fraud”.
The case against the men hinges on allegations that they obtained board approval to set up the executive pension plan in 2005 by concealing from others that the purpose of the scheme was “to increase the security of their pension”. This was contrary to a board agreement there would be no enhancement of executive benefits through the scheme, the documents allege.
Olympus said the executive scheme provided for overly generous fixed 5 percent per annum increases in pension payments once the pension was activated, that it adopted an overly conservative investment strategy and that it dropped a provision to cut benefits for younger surviving spouses.
Woodford and Hillman, whose wife is more than 10 years his junior, said the pension plan was established in 2007 after two years of discussions and that it was transparent and set up in consultation with the board, senior executives, independent trustees and on the advice of advisers and lawyers.
They said Olympus raised no concerns about the pension plan during the last decade before issuing a claim in August 2015 and added allegations of fraud four months later “without any evidence to back them up”.
Woodford, 56, said his annual pension benefit rose to 993,000 pounds at the end of his 30-year Olympus career. This was converted into a capital sum of 64.5 million pounds and transferred to a Self Invested Personal Pension (SIPP), a UK government-approved scheme, with Olympus’s approval in 2014.
Defined pension benefits are linked to the number of years employees work and their salaries, are paid for life and can be paid to spouses, partners or dependants when the retiree dies.
Hillman, who is 64 and drawing his pension, told Reuters by telephone there was a catalog of correspondence to show the executive scheme had been set up and run correctly.
“There is a picture being painted of us being devious and doing things in dark corners when everything has been done openly, in a transparent way,” he said.
($1 = 0.7536 pounds)
Reporting by Kirstin Ridley; Editing by Ruth Pitchford