UPDATE: Ex-Olympus CEO Woodford Suing Olympus For Wrongful Dismissal

Ousted Olympus Corp. (7733.TO) Chief Executive Officer Michael Woodford said Friday he plans to sue his former employer for firing him without any legal basis, only hours after announcing his decision to drop his attempt to retake the company's reins.

Woodford, who was dismissed as CEO and president in October after exposing an accounting scandal at Olympus, said he has already filed a lawsuit against the company with a tribunal court in the U.K. and that another lawsuit in Japan may follow.

The Olympus board's decision to fire him long before his four-year contract had expired "had absolutely no legal basis," Woodford said in a group interview at his hotel room in central Tokyo.

He also said he will seek "substantial and significant" damages from Olympus, while declining to specify the amount.

An Olympus spokesman said the company cannot comment as it hasn't yet confirmed that Woodford has filed a lawsuit.

Woodford's announcement of the lawsuit came after he released a statement earlier Friday saying he has called off his proxy challenge to return to Olympus as the head of a new management team.

In the statement, he said the major reason for discontinuing the battle was an absence of support from Japanese institutional investors.

Woodford and some major foreign institutional shareholders of Olympus have called for the resignation of all the company's board members for having failed to heed Woodford's warnings about accounting irregularities and voting to dismiss him.

"Why have (Japanese institutional investors) not made any criticism of the current board?" Woodford asked rhetorically.

Olympus's major creditors, led by Sumitomo Mitsui Banking Corp., have not supported Woodford in his bid to replace the current board. Sumitomo Mitsui spurned his request to speak with the bank's president.

"I think we could have won a proxy fight," said Woodford, who had been seeking investor support for an alternate slate of directors to be proposed at the next shareholders' meeting as early as March.

"But even if I won, what was I coming back to to?" he said, adding that it would be difficult to run a Japanese company with an absence of support from Japanese institutional investors and banks.

Woodford said that a key event that first made him rethink his plan to launch a proxy battle was an Olympus press conference during his last visit to Japan last month, during which President Shuichi Takayama said that not all the current board members needed to be replaced at once.

The fact that Japanese institutional investors still didn't criticize the current board after Takayama's comment was "shocking" and "discrediting for the country," Woodford said.

Still, he said he made his final decision to drop the proxy battle Thursday, after discussions with investors and people who could have been candidates for his slate of proposed directors.

Woodford, who holds Olympus shares, said he hasn't yet decided whether he will attend the next shareholders' meeting.

-By Juro Osawa, Dow Jones Newswires; [phone]; [e-mail]