Former Bank Executive Arrested for Alleged Role in Olympus Fraud

A former bank executive was accused of accepting more than $10 million from Olympus Corp. (OCPNY, 7733.TO) to participate in a scheme to misrepresent the Japanese camera maker's financial condition, the U.S. Justice Department said.

Chan Ming Fon was arrested in Los Angeles Thursday morning, and was expected to appear in a federal court in California in the afternoon. An attorney for Mr. Chan, a Singapore resident and citizen of Taiwan, couldn't be immediately located for comment.

As an executive for two unnamed banks from 1995 through 2004, Mr. Chan was responsible for servicing accounts maintained by Olympus and its affiliates, the Justice Department said.

From 2004 to 2010, Mr. Chan was involved in a scheme to disguise hundreds of millions of dollars, transferring bond investments to an Olympus-controlled entity that liquidated the bonds to pay an undisclosed, outstanding loan, prosecutors said. The transfers and loan repayment allowed Olympus to present a stronger financial condition to an auditor and investors, the Justice Department said.

Mr. Chan admitted to FBI agents that he provided false information to Olympus's auditor about the company's investments, officials said, and said he had received $10 million in compensation.

"As alleged, Chan Ming Fon was handsomely paid to play an international shell game with hundreds of millions of dollars of assets in order to allow Olympus to keep a massive accounting fraud going for years, duping its auditors and its shareholders," said U.S. prosecutor Preet Bharara. "By allegedly deceiving Olympus" auditors over and over again, the defendant undermined the system of auditor oversight that exists to detect exactly this kind of fraud, a fraud that victimizes investors and undermines confidence in the markets."

Mr. Chan is charged with conspiracy to commit wire fraud, which carries a maximum potential penalty of 20 years in prison.

In September, Olympus and former executives pleaded guilty to criminal charges related to a $1.5 billion accounting scandal that dominated headlines in Japan when it was first disclosed last year.

Write to Kristin Jones at [e-mail]

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