Former Bank Executive Pleads Guilty In Connection With Accounting Fraud At Olympus Corporation
Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHAN MING FON (“CHAN”), a former bank vice president based in Singapore, pled guilty today in connection with his participation in a scheme to defraud investors and auditors regarding the financial condition of Olympus Corporation (“Olympus”). CHAN, who was arrested in December 2012, pled guilty before U.S. District Judge Laura Taylor Swain, pursuant to a cooperation agreement.
According to the Information to which CHAN pled guilty and other court documents:
Olympus is a major manufacturer of medical devices and cameras. Olympus common stock is listed on the Tokyo Stock Exchange. In addition, Olympus American Depository Receipts are traded in the United States. Olympus owns, both fully and in part, numerous subsidiaries and related companies, located in many countries, including the United States.
From 1995 through 2004, CHAN was employed as an executive at two different international financial institutions (“Bank-1” and “Bank-2”). While employed at Bank-1, CHAN served as the relationship manager for Olympus. While employed at Bank-2, he facilitated a loan for hundreds of millions of dollars to a special purpose entity established by Olympus known as Easterside. Olympus did not disclose to its auditor, investors or shareholders the existence of this loan or that it was collateralized by Olympus’s deposits.
Subsequently, from 2005 through 2010, CHAN participated in a scheme to disguise hundreds of millions of dollars that Olympus purportedly invested in government bonds and other secure investments (the “Investment Portfolio”). He served as the manager of a fund – known as SG Bond – that held the Investment Portfolio and, at the direction of Olympus’s executives, transferred the Investment Portfolio to Easterside, which then liquidated the bonds and used the proceeds, in part, to repay the loan from Bank-2.
As the manager of Olympus’s purported investment, CHAN submitted, and caused to be submitted, false and misleading documents to Olympus’s outside auditor (“Auditor”) regarding the Investment Portfolio. Specifically, CHAN prepared and provided several false and misleading confirmations of the Investment Portfolio’s value. He did not disclose in these confirmations that the Investment Portfolio had been transferred to Easterside, nor did he disclose that the Investment Portfolio had been liquidated. In June 2009, he provided the Auditor with a confirmation of the Investment Portfolio’s net asset value and a list of assets that purportedly constituted the Investment Portfolio. At the direction of a co-conspirator, CHAN forged a signature on the confirmation to make it appear that it had been signed by a bank representative. CHAN submitted these false and misleading documents, including the confirmation with the forged signature, to deceive the Auditor into believing that Olympus’s purported investment in bonds and fixed income securities was safe and secure at SG Bond.
In 2010, Olympus-controlled entities transferred hundreds of millions of dollars to an entity controlled by CHAN. In turn, he used these funds to purchase bonds and other securities that were similar to the assets that originally had constituted the Investment Portfolio. Upon acquiring these bonds and securities, he caused the assets to be transferred to Easterside, which in turn transferred the assets to SG Bond in order to replace the Investment Portfolio that SG Bond had purportedly held for Olympus since 2005.
In consideration for his assistance to Olympus including in this accounting fraud scheme, CHAN received in excess of $10,000,000 from Olympus or entities controlled by Olympus.
CHAN, 50, resides in Singapore and is a citizen of Taiwan. He pled guilty to one count of conspiracy to commit wire fraud, which carries a maximum potential penalty of five years in prison. CHAN is scheduled to be sentenced by Judge Swain on January 10, 2014.
Mr. Bharara praised the Federal Bureau of Investigation for its outstanding work in the investigation. He also thanked the U.S. Securities and Exchange Commission.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant United States Attorney Zachary Feingold is in charge of the prosecution.