Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 1 of 111

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF PENNSYLVANIA

CHAITANYA KADIYALA and KELLY SHARKEY, on behalf of themselves Case No. 1 1-cv-7 103 individually and all others similarly situated,

Plaintiffs,

V.

OLYMPUS CORPORATION, TSUYOSHI KIKUKAWA, and SHUICHI TAKAYAMA,

Defendants.

PLAINTIFFS' SECOND AMENDED CLASS ACTION COMPLAINT

VIANALE & VIANALE LLP LITE DEPALMA GREENBERG, LLC Kenneth J. Vianale (admitted pro hac vice) Steven Greenfogel 2499 Glades Road, Suite 112 Daniel B. Allanoff Boca Raton, FL 33431 1521 Locust Street, 8th Floor Tel: (561) 392-4750 Philadelphia, PA 19102 Tel: (215) 564-5182 SARRAF GENTILE LLP Ronen Sarraf (admitted pro hac vice) Liaison Counsel for Plaintiffs Joseph Gentile (admitted pro hac vice) 450 Seventh Avenue, Suite 1900 New York, New York 10123 Tel: (212) 868-3610

Co-Lead Counsel for Plaintiffs Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 2 of 111

TABLE OF CONTENTS

I. NATURE OF THE ACTION ...... 1

II. BASIS OF THE ALLEGATIONS...... 2

III. JURISDICTION AND VENUE...... 5

IV. PARTIES...... 6

A. Plaintiffs ...... 6

B. Defendants...... 6

C. Additional Wrongdoers...... 8

V. OVERVIEW OF DEFENDANTS' FRAUDULENT SCHEME...... 9

VI. CLASS ACTION ALLEGATIONS...... 15

VII. SUBSTANTIVE ALLEGATIONS...... 17

A. Olympus Engages in Financial Engineering and Incurs Substantial Losses .... 17

B. Olympus Begins the Cover Up and Moves Its Losses Off Its Books...... 21

C. Olympus Tries to Settle The Losses And Bring The Tobashi To An End...... 26

(1) The "Mickey Mouse" Companies - Altis, News Chef and Humalabo ...... 26

(2) Defendants Grossly Overpay for Gyms ...... 30

VIII. OLYMPUS ISSUES FALSE AND MISLEADING STATEMENTS ...... 34

IX. WOODFORD ATTEMPTS TO UNCOVER THE TRUTH...... 49

A. The Facta Articles...... 49

B. Woodford Writes to the Board...... 51

C. Woodford's Sixth Letter...... 55

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D. The Problems Woodford and the PwC Report Identify...... 57

(1) The Gyrus Deal ...... 57

(2) Altis, Humalabo and News Chef...... 63

X. DEFENDANTS DENY ANY WRONGDOING...... 64

XI. DEFENDANTS FINALLY REVEAL THE TRUTH...... 71

XII. LOSS CAUSATION ALLEGATIONS ...... 79

XIII. THE FEDERAL SECURITIES LAWS APPLY...... 81

A. ADRs in General...... 83

B. Olympus ADRs...... 84

C. Plaintiffs Took Title To Their Olympus ADRs in the United States...... 90

XIV. APPLICABILITY OF THE PRESUMPTION OF RELIANCE: THE FRAUD ON THE MARKET DOCTRINE...... 92

XV. NO SAFE HARBOR...... 93

XVI. ADDITIONAL SCIENTER ALLEGATIONS...... 94

XVII. CAUSES OF ACTION...... 101

XVIII. JURY TRIAL DEMANDED...... 104

XIX. PRAYER FOR RELIEF ...... 104 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 4 of 111

I. NATURE OF THE ACTION

1. Plaintiffs bring this class action on behalf of themselves and all other purchasers of the American Depositary Receipts ("ADRs") of Olympus Corporation ("Olympus" or the

"Company") between November 7, 2006 and November 7, 2011, inclusive, (the "Class Period"), pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange

Act"), 15 U.S.C. §78j(b), 78t(a), and Rule lOb-5, 17 C.F.R. § 240.1Ob-5.'

2. Olympus is a Japanese manufacturer and world-wide seller of digital cameras and medical equipment. During the Class Period, Olympus issued false statements about its finances stemming from substantial losses it had suffered on investment securities. In the late 1980's,

Olympus began to lose money on its product sales in the United States. It tried to compensate for this sales shortfall by trading in speculative securities, betting on quick profits. Olympus lost hundreds of millions of dollars on its positions. Matters got worse when Olympus tried to recoup these trading losses with further high-risk market bets. Olympus only added to its losses, for a total topping more than a billion dollars.

3. Olympus nevertheless refused to face the day of reckoning by recognizing its trading losses on its public financial statements. Instead, it carried out a fraudulent scheme to push the losses off its books and mask them as "goodwill" on its corporate acquisitions goodwill which could be written down and erased over time. Olympus' scheme was successful until an employee whistle-blower leaked information to a financial publication. At first, Olympus

Many of the events described herein occurred in Japan which is in the UTC/GMT+9 time zone and does not employ daylight savings time. It is 13 to 16 hours ahead of the United States during the summer months, and 14 to 17 hours ahead of the United States during the winter months. As a result, certain events in Japan or statements made in Japan, as alleged herein, technically occurred on the preceding day in the United States. For example, on the day Olympus formally disclosed its $1.7 billion fraud alleged herein, it was November 8, 2011 in Japan, but November 7, 2011 in the United States. Unless otherwise noted, the dates used in this Complaint correspond to the place where the activities occurred or the relevant statements were made. Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 5 of 111

denied press reports that it had fraudulently accounted for several corporate acquisitions.

Eventually, however, Olympus was pressured to reveal the full extent of the fraud. In a press release dated November 8, 2011, the Company admitted to a loss recognition deferral scheme going back to the 1990's. Olympus' stock price dropped on the news, causing damage to

Plaintiffs and other purchasers of Olympus ADRs.

II. BASIS OF THE ALLEGATIONS

4. Plaintiffs allege the facts in this Complaint based on personal knowledge as to themselves and their own acts, and as to all other matters, based upon their attorneys' investigation. That investigation included, among others, a review of the sources listed below and on the List of Exhibits appended hereto:

(a) The annual reports, regulatory filings, financial material and press releases published by the Company, including but not limited to, financial statements issued by the

Company and their corrected and restated versions, which are attached hereto as Exhibits I through 18 and incorporated herein by reference.

(b) Early in the litigation, Co-Lead Counsel asked to speak to Michael

Woodford ("Woodford"), former Chief Executive Officer of Olympus and a witness of the events described herein with first-hand information, as discussed below in paragraph 210. Co-

Lead Counsel also reviewed six letters that Woodford sent to the Company's top directors, officers and auditors (including the English language Interim Report prepared by

PricewaterhouseCoopers Legal LLP), which are attached hereto as Exhibit 19 and incorporated herein by reference, as well reviewed Woodford's book, Exposure (New York: Penguin, 2012), which details the Olympus financial fraud alleged herein.

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(c) The 185-page Investigation Report, dated December 6, 2011, (referred to herein as the "IR"), prepared by the Third Party Committee as well as a review of its 38-page summary.

(i) A copy of the IR can be found at http://www.olympus - global.comlenlinfo/2011b/ifl ll2O6corpe_2.pdf and is attached hereto as Exhibit 20 and incorporated herein by reference.

(ii) A copy of the IR summary can be found at hup://www.olympus-global.comlen/commonlpdf/ifl 11206corpe.pdf and is attached hereto as

Exhibit 21 and incorporated herein by reference.

(iii) The Company formally established the Third Party

Committee on November 1, 2011. See Olympus Nov. 1, 2011, press release. The Committee was made up of five attorneys-at-law and one certified public accountant: Attorney Tatsuo

Kainaka, Chairman of the Committee, former Justice of the Japanese Supreme Court and former

Superintending Prosecutor of the Tokyo High Public Prosecutors' Office; Attorney Hideki

Nakagone, former President of Nagoya High Court; Attorney Tomoyoshi Arita, former

Superintending Prosecutor of Fukuoka High Public Prosecutors' Office; Attorney Osamu Sudoh;

Attorney Eiji Katayama; and Katsuaki Takiguchi, a certified public accountant. Id.

(iv) The Committee had many other attorneys to assist them, as well as the accounting firms Deloitte Touche FAS Co., Ltd. and Deloitte Touche Tomatsu LLC.

See IR at 2-3.

(v) The Committee's stated purpose was to "find out whether there was any fraudulent or inappropriate conduct or unreasonable business judgment on the part of Olympus ... [in connection with] ... the acquisitions of Gyrus and the Three Domestic Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 7 of 111

Companies [Altis, News Chef, and Humalabo] ..., and to provide a proposal to improve and enhance the corporate governance regime ...." Id. at 3.

(d) The 151-page Investigation Report of the Director Liability Investigation

Committee to the Board of Auditors of Olympus Corporation on the scheme a copy of which can be found at http://www.olympus-global.comlenlcorc/ir/tes/pdf/nr1201 10_2.pdf and is attached hereto as Exhibit 22 and incorporated herein by reference.

(e) The 162-page Investigation Report of the Non-Director Management

Liability Investigation Committee to the Board of Directors of Olympus Corporation on the scheme a copy of which can be found at http://www.olympus- global.com/en/corc/ir/tes/Pdf/nrl20ll7 -5.pdf and is attached hereto as Exhibit 23 and incorporated herein by reference.

(f) The Complaint in the action entitled US. v. Chan Ming Fon, No. 12-

MAG-3307 (S.D.N.Y., Dec. 20, 2012), which details certain portions of the Olympus fraud.

(g) The news reports published by Facta, and referred to herein, that raised questions about the accounting for the corporate transactions alleged herein.

(h) Relevant news articles, analyst reports and other matters of public record, and consultation with a financial expert.

Many additional facts and documents supporting the allegations herein are known only to Defendants and/or are within their exclusive custody and control. Plaintiffs believe that additional evidentiary support for the allegations herein will emerge after a reasonable opportunity to conduct discovery of Defendants and non-parties.

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III. JURISDICTION AND VENUE

6. This Court has jurisdiction over the subject matter of this action pursuant to 28

U.S.C. §§ 1331, 1337 and 1367 and Section 27 of the Exchange Act (15 U.S.C. §78aa).

7. This action arises under Sections 10(b) and 20(a) of the Exchange Act (15 U.S.C.

§78j(b) and 78t(a)) and Rule 10b-5 promulgated thereunder (17 C.F.R. § 240.10b-5). Venue is proper in this District pursuant to Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28

U.S.C. §1391(b) and (c). Substantial acts in furtherance of the alleged fraud and/or its effects have occurred within this District.

8. This Court has subject matter jurisdiction over Plaintiffs' securities claims because Plaintiffs purchased the Olympus ADRs in the United States, took title to them here, or became irrevocably liable for their purchase or cost here, as detailed below in the section entitled

"The Federal Securities Laws Apply."

9. In connection with the acts and omissions alleged in this Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications, including the internet and the facilities of the over-the-counter market.

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IV. PARTIES

A. Plaintiffs

10. Lead Plaintiff Chaitanya Kadiyala resides in the United States and purchased

Olympus ADRs in the United States during the Class Period, as set forth in his certification annexed hereto and incorporated herein, and was damaged thereby.

11. Plaintiff Kelly Sharkey resides in the United States and purchased Olympus

ADRs in the United States during the Class Period, as set forth in his certification annexed hereto and incorporated herein, and was damaged thereby.

B. Defendants

12. Defendant Olympus, founded in 1919, is a Japanese corporation based in Tokyo,

Japan.

(a) Olympus manufactures and sells a variety of products world-wide through its five business segments: (i) the Medical segment manufactures and sells medical endoscopes, surgical endoscopes, endoscope disposal equipment and ultrasonic endoscopes; (ii) the Life

Science segment manufactures and sells clinical hemanalysis, biological microscopes, and industrial microscopes; (iii) the Imaging segment manufactures and sells digital cameras and voice recorders; (iv) the Information Communication segment sells mobile terminals; and, (v) the Others segment provides bio-materials, system development, and other services.

(b) The Company's common stock trades on the Tokyo Stock Exchange. The depositary and transfer agent for the Company's ADRs is The Bank of New York Mellon (the

"Bank of New York"), 101 Barclay Street, New York, New York 10286.

(c) Olympus advertises heavily, and conducts substantial business in, the

United States which (along with Mexico and Canada) represented 21.5% of the Company's total Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 10 of 111

worldwide sales in the year ending March 31, 2011. The Company and its officers and/or directors regularly visit the United States to meet with investors.

(d) The Company maintains a registered agent for the service of process for most purposes in this District, namely the Chief Financial Officer of its subsidiary, Olympus

Corporation of America, located at 3500 Corporate Parkway, P.O. Box 610, Center Valley, PA

18034. See Form FX, filed with the SEC on 1115110. Olympus also files reports with the SEC in

Washington, D.C., in connection with its issuance of stock and tender offers.

(e) On March 7, 2012, the Company was indicted in Japan for inflating its net worth in its financial statements and engaging in fraudulent transactions to hide substantial

Company losses. On September 25, 2012, the Company plead guilty to the charges.

13. Defendant Tsuyoshi Kikukawa ("Kikukawa") joined Olympus in 1964 and became a Company director responsible for the finance department in 1999. In 2001 he was appointed President and representative director of the Company. At all material times during the

Class Period Kikukawa served on the Company's Board of Directors (the "Board") as its

Chairman, as well as the Company's President and Chief Executive Officer. On October 26,

2011, he resigned as Chairman, President and CEO of the Company. On November 24, 2011, he resigned from the Board. On February 16, 2012, he was arrested and on March 7, 2012, indicted in Japan for inflating Olympus' net worth in its financial statements and engaging in fraudulent transactions to hide substantial Company losses. On September 25, 2012, Kikukawa pleaded guilty to the charges.

14. Defendant Shuichi Takayama ("Takayama ") joined Olympus in 1970 and became a Company director in 2006. At material times during the Class Period Takayama

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served as the Company's President and senior executive and a member of the Board. He resigned from all positions at the Company on April 20, 2012.

15. Defendants Kikukawa and Takayama are sometimes referred to herein as the

Individual Defendants. As senior officers and/or directors of Olympus, the Individual Defendants exercised their power and influence to cause Olympus to engage in the fraudulent practices alleged herein, and were controlling persons of the Company under Section 20 of the Securities

Exchange Act of 1934.

C. Additional Wrongdoers

16. Hideo Yamada ("Yamada") joined Olympus in 1963 served at all material times during the Class Period as a Company director and executive vice president. On November 24,

2011, Yamada resigned from the Board. On February 16, 2012, he was arrested and on March 7,

2012, indicted in Japan for inflating Olympus' net worth in its financial statements and engaging in fraudulent transactions to hide substantial Company losses. On September 25, 2012, Yamada pleaded guilty to the charges.

17. Hisashi Mon ("Mori") joined Olympus in 1981 and served at all material times during the Class Period as a Company director and executive vice president. On November 24,

2011, Mori resigned from the Board. On February 16, 2012, he was arrested and on March 7,

2012, indicted in Japan for inflating Olympus' net worth in its financial statements and engaging in fraudulent transactions to hide substantial Company losses. On September 25, 2012, Mon pleaded guilty to the charges.

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V. OVERVIEW OF DEFENDANTS' FRAUDULENT SCHEME

18. In 1985, by international agreement, Japan, the United States, West Germany,

France, and Britain all agreed to bring down the value of the dollar, which had been rising steadily. When the dollar was strong, Olympus could sell its products in the United States and realize more than 250 yen per dollar. But when the dollar began to be devalued, the number of yen declined to 200 per dollar in 1985, and then to 121 per dollar by the end of 1987. See

"Olympus Corp.", The New York Times, Aug. 2, 2012. The currency inequality caused

Olympus' operations to lose large amounts of money.

19. To compensate for the loss of operating revenue, Olympus began making speculative investments - zaiteku - in securities, hoping to score big trading profits. That strategy worked to some extent until 1990, when the Japanese Nikkei stock index lost half its value. Olympus was then faced with huge trading losses: approximately Y100 billion or $730 million.

20. But Olympus did not disclose its trading losses to the public. Accounting rules then in effect allowed Olympus to carry its speculative securities at cost, even though they were greatly devalued. Olympus sought to recoup its losses by making more speculative trades. That strategy also failed, leaving Olympus with losses of over $1 billion.

21. In 1998, accounting rules governing Olympus changed. The new rules required

Olympus to record its investment securities at their true market value - called "marking to market." But to do so would have exposed Olympus' prior trading losses.

22. Rather than disclose the losses, Olympus made the decision to make them vanish with an intricate scheme, or tobashi (to "fly away"). Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 13 of 111

23. In September 1998, Yamada and Mori helped devise a "loss separation" scheme to cover up Olympus' trading losses. Yamada was then Head of Olympus' Administration and

Finance Department, and Mori worked under him. See IR at 17. Without the scheme, Olympus would have to begin marking down the value of its investment securities by the fiscal year ended

March 2001.

24. Yamada and Mori hatched the loss separation scheme with the help of some of

Olympus' outside consultants. The scheme was approved by then-Olympus President, Masatoshi

Kishimoto, who became President of Olympus in June 1993. See IR at 12, 17. The scheme was also told to Minoru Ota ("Ota"), Olympus' head of accounting. See IR at 17.

25. Broadly speaking, the loss separation scheme had the following features: (a)

Olympus had to sell its bad investments to off-balance sheet Funds that Olympus had set up and funded with borrowed money; (b) these off-balance sheet Funds then bought at a low price three

"Mickey Mouse" companies having little relevance to Olympus' core businesses - Altis Co.,

Ltd. ("Altis"), News Chef Co., Ltd. ("News Chef'), and Humalabo Co., Ltd. ("Humalabo"); (c) in 2008, Olympus purchased these three companies from Olympus' off-balance sheet Funds at grossly-inflated prices; (d) the excess money Olympus paid for the three companies over their actual value was treated as goodwill; and (e) the separated losses were transformed and vanished into goodwill and accounted for publicly. See IR at 16-17, 36-38.

26. Olympus' tobashi had another trick to make its trading losses disappear. Olympus paid whopping merger and acquisition fees to its financial advisors for work they did helping

Olympus acquire a London-based manufacturer, Gyms Group PLC. ("Gyrus"). Olympus paid

$2.2 billion (270 million yen) to acquire Gyrus - a large premium - and $693 million to Axes

America LLC ("Axes") and Axam Investments Ltd ("Axam") in financial advisory fees an

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absurd, unheard of number. Financial advisory fees seldom exceed 1 to 2 per cent of the total corporate acquisition price.

27. The advisory fees paid to Axes included call options worth approximately $177 million. Axes sold the call options to Axam for $24 million. Olympus then bought the call options back by issuing dividend preferred stock to Axam. Later, in March 2010, Olympus bought back these dividend preferred shares at a fantastically inflated price of $620 million. The sole purpose was to hide Olympus' remaining trading losses. The difference between the book value of the dividend preferred shares, $177 million, and the $620 million paid to Axam for these shares was recorded on Olympus' books as goodwill - which could be written down over time.

See IR at 77.

28. Defendant Kikukawa knew about the tobashi scheme, went along with it, and tried to keep it covered up when it began to unravel.

29. Defendant Takayama took over for Kikukawa as Olympus President on or before

October 27, 2011. Takayama knew about the tobashi scheme much earlier, but nevertheless knowingly perpetuated the tobashi scheme on October 27, 2011, when he told investors that that the acquisition of Altis, News Chef, and Humalabo, as well as the financial advisory fees paid on the Gyrus acquisition, were perfectly legitimate. Takayama did so despite knowing the serious questions that had been raised about these transactions by Woodford as alleged below. Eleven days later, on November 8, 2011, Takayama had to tell investors the truth in a press conference.

See Olympus Nov. 8, 2011, press release.

30. The fraud eventually began to unravel when a whistleblower within Olympus shared information with Facta, a financial news magazine that covers Japanese companies. On

June 24, 2011, Facta requested specific information from Olympus' public relations and investor

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relations departments about the purchase of Altis, Humalabo, and News Chef, and about the goodwill associated with the Gyrus acquisition. Olympus flatly refused. Facta then published an article about the matter, "declaring war" on Olympus.

31. Woodford, working at Olympus in London, read of the June 24, 2011 Facta article, as well as other even more revealing articles Facta subsequently published. In Tokyo,

Woodford confronted Kikukawa and Mori, both English speakers, about the Facta article.

Exposure, 24-25, 29. Both stonewalled Woodford.

32. Woodford decided that regardless of the personal and professional consequences, he needed to get to the bottom of the allegations in the Facta articles. He wrote a total of six letters to Mori and Kikukawa, with copies to Olympus' outside auditors and all of Olympus'

Board members, including Takayama, demanding answers to the factual and accounting issues raised in the Facta articles. None of the responses he received was satisfactory. As an Olympus officer and director, Woodford hired PricewaterhouseCoopers Legal LLP ("PwC") to look into the Gyrus transaction. PwC prepared an Interim Report on its findings, dated October 11, 2011

(the "PwC Report"). The PwC Report raised questions and corporate governance concerns about the Gyrus acquisition and payments to Axes and Axam. Woodford called on Kikukawa and Mon to resign.

33. Kikukawa sought to silence Woodford and his potential public exposure of the tobashi. At a special meeting of the Board in Tokyo, with Woodford present, Kikukawa told

Woodford he was fired. The Olympus Board consented, remaining fully loyal to Kikukawa despite the serious questions of fraud Woodford had brought to their attention in his six letters.

Woodford was escorted out of Olympus' offices. See Exposure 66-70. Olympus followed with a press release on October 19, 2011 stating that Woodford had been dismissed because "major

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differences had arisen between [him] and other management regarding the direction of the company's business ...." See Olympus Oct. 10, 2011, press release. Olympus criticized the PwC

Report that Woodford had commissioned as "speculative," at "variance with the facts," and

"open to misinterpretation." Id.

34. On October 27, 2011, Takayama continued the fraud when he told the public in a press release that the purchase of the three companies was completely legitimate. See Olympus

Oct. 27, 2011, press release and powerpoint slides. On November 1, 2011, however, under growing pressure, Olympus announced the formation of the Third-Party Committee to investigate the allegations of fraud.

35. Only a few days later, on November 8, 2011, Olympus admitted that "the

Company has been engaging in deferring the posting of losses on investment securities, etc. since around the 1990's, and that both the fees paid to advisors and funds used to buy back preferred stock in relation to the Gyrus Group PLC acquisition, as well as the purchase funds for the acquisition of the three domestic Japanese companies [Altis, News Chef, and Humalabo] had been ... used in part to resolve unrealized losses on investment securities, etc. by such deferral in the posting of these losses." See Olympus Nov. 8, 2011, press release.

36. Kikukawa, Mori, and Yamada formally resigned on November 24, 2011.

37. Olympus sued Kikukawa, Takayama, Mori, Yamada, and other Olympus executives in Tokyo District Court, seeking hundreds of millions of dollars in damages that the

Company lost because of the scheme.

38. On February 16, 2012, Kikukawa, Mori, and Yamada were arrested by the Tokyo

Police, along with others involved in the tobashi. On March 7, 2012, Kikukawa, Mori, Yamada and others were indicted in Tokyo for inflating Olympus' net worth in its financial statements

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and engaging in fraudulent transactions to hide substantial Company losses for over a decade.

Olympus was indicted as well. On September 25, 2012, both Kikukawa and Olympus pleaded guilty. Mori and Yamada also pleaded guilty.

39. Olympus agreed to pay a "surcharge" to the Japanese Securities and Exchange

Surveillance Commission of191.8 million. See Olympus May 18, 2012, press release. On May

29, 2012, Olympus agreed to pay Woodford £10 million ($15 million) to settle the wrongful termination lawsuit he brought against the Company in London. See Olympus June 8, 2012, press release. The Company also admitted to "significant deficiencies" in its internal controls and financial reporting. See Olympus June 28, 2012, press release.

40. Defendants' fraudulent conduct is regarded as the biggest financial scandal in

Japan's history. In the United States, Olympus is under investigation by the FBI and SEC. On or about December 20, 2012, the U.S. Department of Justice filed criminal charges against Chan

Ming Fon for conspiring with Olympus and its employees to carry out the tobashi. See US. v.

Chan Ming Fon, No. 12-MAG-3307 (S.D.N.Y., Dec. 20, 2012). According to the complaint:

As described herein, from at least in or about 2004 up to and including in or about 2010, CHAN MING FON, the defendant, and other known and unknown, caused Olympus and related companies to engaged in transactions that they knew would result in erroneous accounting entries in the books and records of Olympus. These accounting entries caused Olympus's financial statements to give the misleading and false impression to, among others, investors and shareholders, that the company maintained a stronger financial condition than it actually did.

Complaint ¶ 10. The defendant acknowledged his wrongdoing to the FBI. Id. ¶ 15(k).

41. In several of its press releases, Olympus "sincerely apologizes for causing trouble to our shareholders, investors, business partners, customers and all other relevant parties for all inconvenience caused." See, e.g., Olympus press releases dated Nov. 8, 2011, Dec. 21, 2011,

Mar. 7, 2012, April 13, 2012, and May 18, 2012.

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VI. CLASS ACTION ALLEGATIONS

42. Plaintiffs bring this action as a class action pursuant to Federal Rule of Civil

Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all persons who purchased or otherwise acquired Olympus ADRs between November 7, 2006 and November 7, 2011, inclusive (the "Class Period"), and who were damaged thereby. Excluded from the Class are

Defendants, members of the immediate family of each of the Individual Defendants or any entity in which any excluded person has a controlling interest, and the legal representatives, heirs, successors and assigns of any excluded person.

43. The members of the Class are so numerous that joinder of all members is impracticable. Although the exact number of Class members is unknown to plaintiffs at this time and can only be ascertained through appropriate discovery, plaintiffs believe that there are hundreds of members of the Class located throughout the United States. During the Class Period,

Olympus ADRs were actively traded on the OTC under the symbols "OCPNY." Record owners and other members of the Class may be identified from records maintained by Olympus and/or its transfer agents and may be notified of the pendency of this action by mail, using a form of notice similar to that customarily used in securities class actions.

44. Plaintiffs' claims are typical of the claims of the other members of the Class because all members of the Class were similarly affected by Defendants' wrongful conduct in violation of federal law as alleged herein.

45. Plaintiffs will fairly and adequately protect the interests of the members of the

Class and have retained counsel competent and experienced in class and securities litigation.

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46. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are:

(a) whether Defendants violated the federal securities laws by their acts and omissions as alleged herein;

(b) whether Defendants participated in and pursued the common course of conduct complained of herein;

(c) whether documents, press releases, and other statements disseminated to the investing public and the Company's shareholders during the Class Period misrepresented material facts about the business, finances, financial condition and prospects of Olympus;

(d) whether statements made by Defendants to the investing public during the

Class Period misrepresented and/or omitted to disclose material facts about the business, finances, value, performance and prospects of Olympus;

(e) whether the market price of Olympus ADRs during the Class Period was artificially inflated due to the material misrepresentations and failures to correct the material misrepresentations complained of herein; and,

(f) whether and to what extent the members of the Class have sustained damages and the proper measure of damages.

47. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, because the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually

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redress the wrongs done to them. There will be no difficulty in the management of this suit as a

class action.

VII. SUBSTANTIVE ALLEGATIONS

48. Throughout the Class Period, Defendants issued statements, financial information, annual reports and communications about the Company. These statements, as detailed below, were false and misleading. Defendants also omitted material facts necessary in order to make such statements, in light of the circumstances under which they were made, not misleading because, among others, they intentionally hid losses incurred by the Company and falsely represented such losses in the form of sham corporate transaction payments. In total, Olympus incurred roughly $1.7 billion in undisclosed trading losses and created fictitious corporate transactions for the sole purpose of hiding such losses. Olympus then spent years and roughly $2 billion additional dollars covering up the losses, hiding them and eliminating them from its books. Olympus did so through a maze of fictitious corporation acquisitions and accounting tricks orchestrated, approved and carried out by the Company's most senior officers and directors. When the Company's staggering losses and multi-year efforts to cover up such losses were finally disclosed, the Company's stock price plummeted and shareholders were injured.

A. Olympus Engages in Financial Engineering and Incurs Substantial Losses

49. During the 1980s the Japanese yen enjoyed a strong and appreciating U.S. dollar.

By 1984, the dollar was worth more than 250 yen which meant that Japanese exporters could reap large profits exporting goods to the United States. This ultimately led to a gaping Japanese trade surplus with the United States.

50. In 1985, in response to this growing trade imbalance, an agreement was reached between the United States and the governments of Britain, France, West German and Japan to

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help depreciate the dollar. The "Plaza Accord," signed on September 22, 1985, and named after the Plaza Hotel in New York where the agreement was reached, set in motion a series of events that would eventually reduce the value of the dollar.

51. The signatories to the Plaza Accord agreed to reduce the value of the dollar. To do so the governments would intervene in the currency markets to systematically bring down the value of the dollar. By the end of 1985, the rate was down to 200 yen, and by the end of 1987 it was 121 yen. The business of a Japanese exporter was no longer as profitable as it once was.

52. Following the signing of the Plaza Accord, the value of the yen began to rise

sharply against the dollar. This, coupled with low-interest rates, resulted in an economic bubble

in Japan. For example, in the latter half of the 1980s, stock prices in Japan tripled.

53. In 1985, Olympus (among other Japanese companies) faced a problem: the sharp

rise in the value of the yen was causing operating income to fall. Faced with this big drop in

operating profit, then president Toshiro Shimoyama ("Shimoyama") determined that it would be

difficult improving operating profit organically so he laid out a plan to boost operating profits in non-operating areas, i.e., he decided to engage in zaiteku or speculative investing.

54. The shift to what Olympus internally described as "active financial management policies" was a major shift for Olympus. Prior to this, Olympus was managing financial products with relatively low risk, investing in government and corporate stocks and bonds. By the late 1980s, however, Olympus was betting on interest-rate swaps, currency swaps and structured investments that included derivatives of these underlying investments, as well as

Nikkei stock index futures and related structured instruments. The Company's financial engineering was done using specified money and fund trusts called tokkin.

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55. This speculative investment strategy proved successful until the Japanese bubble

burst in 1990 and the Japanese Nikkei stock index lost about half its value in less than a year,

falling from a high of Y38,000 in late 1989 to below V20,000 in late 1990. That year, as a result

of Japan's economic collapse and the Company's large bets in speculative investments,

Olympus incurred substantial losses. It was thought that Olympus could use tokkin and other

instruments to recover such losses and it began to increase its tokkin management activity.

56. Shimoyama's successor in 1993 was Masatoshi Kishimoto ("Kishimoto"). At the

time, Yamada was the leader of the Finance Group in the Accounting Department and

approached Kishimoto about publicly disclosing the Company's losses. In response, Kishimoto

replied: "We will wait, because the losses will decrease if the market recovers, and we can turn

things around." JR at 75. In effect, the Company was hoping that the market would rebound

and the problems the Company was hiding would simply resolve on their own.

57. In May 1995, Kikukawa was appointed Managing Director in charge of financial

affairs. By 2000, Kikukawa became personally involved in the Company's cover up. He had

by this point learned that Olympus was carrying unrealized and undisclosed losses and that it

had engaged in various tobashi in order to defer these. He also learned about the separation and

settlement scheme, based on directives from Kishimoto and reports from Yamada. See JR at

18-19,76.

58. By 1997, the Company's losses approached V 50 billion. In response to these mounting losses, the Company devised a plan to use derivatives and other financial instruments that, while risky, promised higher returns. To cover its losses in the immediate future, the

Company began to purchase financial products that promised to deliver years' worth of interest in advance. These were high-risk instruments and if they showed losses at maturity, the

19 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 23 of 111

advance interest was also added to the losses, thus amplifying the losses. Ultimately, these

riskier investments lost money and thus made things worse.

59. As these losses mounted and grew the Company chose to hide them rather than

disclose them to shareholders. At the time the Company's losses could be hidden because the

accounting rules in Japan, as well as in other countries, allowed investments to be carried at

cost. And while there was some hope that additional risky investments could somehow reverse

the losses, the opposite occurred, with the Company incurring even larger losses.

60. Olympus was content to sit on the losses until the late 1990s when prospective

changes in the accounting rules threatened to force their disclosure. The new accounting

standards required that marketable securities held for trading purposes, and any other

marketable securities for which a current market value could be determined should be recorded

on the balance sheet at market value. This meant that specified money trusts, specified fund trusts and derivative transactions held for investment purposes for which a market value could be determined, had to be held at market value.

61. Beginning on or after April 1, 2000 (meaning the fiscal year ending March 31,

2001), Olympus would have to apply these new accounting standards and thus reflect its unrealized losses as losses in that fiscal year. Also, where the market value of a specific financial product had clearly fallen, with little prospect of recovery, it would have to post the impairment losses (mandatory reduction in value) on its profits/loss statement as a lump sum for the current fiscal year.

62. In light of the pending introduction of these new financial accounting standards, the Company's auditor, KPMG AZSA LLC, requested that management and the audit

20 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 24 of 111

committee begin planned disposition of unrealized losses and make market valuations of its

financial assets.

63. By the late 1990s, on the eve of the introduction of new mark-to-market

accounting rules, the Company had incurred almost V100 billion in undisclosed losses. To

comply with the new accounting rules would have revealed the massive trading losses the

Company had incurred. Instead, the Company, led by its top officers and directors, embarked

on a scheme to hide the losses from the public. As the Investigative Report points out, many

Japanese companies incurred investment losses during this time but most, unlike Olympus,

chose to properly disclose them:

The trend at that time [1990], that cannot be said to be healthy, of manufacturers turning to financial management techniques in an attempt to produce profits in areas other than their core business should be reflected on, but the majority of leading companies that incurred a large amount of losses due to its failure in financial management techniques faced and accepted such failures, decided to recover the losses due to such failure under slogans such as 'a return to the core business' and 'selection and concentration,' actualized such losses through settlement of accounts in the 1990's, amending their balance sheets to accurately reflect the actual status of the company, and have now admirably regained their noble figure as leading companies."

JR at 178 (emphasis added).

B. Olympus Begins the Cover Up and Moves Its Losses Off Its Books

64. In an effort to avoid the disclosure requirements of the upcoming accounting revisions, the Company - led by Yamada and Mon - embarked on two schemes: (a) the Loss

Separation Scheme; and, (b) the Loss Disposition (or Settlement) Scheme. Olympus would move the losses of its books and, once removed, dispose of them entirely.

65. The plan first involved "selling" the losing investments, at original cost, to shell companies set up by Olympus for that purpose. Under lenient accounting rules, those shell companies would not have to be consolidated with Olympus, so the losses could remain hidden. 21 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 25 of 111

Once that was completed, the Company would then get out of the losses through overpriced

acquisitions for which they paid grossly inflated investment advisory fees. The excess

payments would go to off-balance-sheet subsidiaries to make them whole. That "cost" would

be put on the Company's balance sheet as goodwill which could then be amortized - written off

- over a number of years. Once that was done, the balance sheet would show an accurate value

for Olympus.

66. The first part of the scheme - to sell the losing investments to shell companies -

began with Yamada and Mon. In the late 1990s they consulted with the president of Axes

Japan Securities, Akio Nakagawa ("Nakagawa") and the president of Axes, Hajiine Sagawa

("Sagawa"), with whom they had been previously consulted. Yamada and Mori worked out the

scheme by which the financial instruments that held the unrealized loss were to be sold at the

book value to unconsolidated funds.

67. With the help of Nakagawa and Sagawa, Olympus set up Receiver Funds that

would remain off Olympus' balance sheet - would not be consolidated with Olympus'

consolidated financial statements - and that would buy the investment securities with unrealized

losses. Around 1998, Nakagawa and Sagawa at the request of Olympus used their expertise and

contacts to set up a fund registered in the Cayman Islands by 1998. This is the first Receiver

Fund. There would eventually be at least 14 such Receiver Funds set up to carry out the

scheme.

68. These Receiver Funds needed cash to actually buy the financial instruments at their book value. To provide them with the necessary cash, Yamada and Mori had banks provide financing to the Receiver Funds with the backing of Olympus' own deposits. Yamada and Mori were introduced by Nobumasa Yokoo ("Yokoo") of Global Company ("GC") to

22 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 26 of 111

senior personnel of LGT Bank in Lichtenstein for the purpose of financing the Receiver Fund.

To do so, Olympus would pledge Japanese government bonds in exchange for financing from

LGT Bank. Mori visited LGT Bank and explained that the financing arrangement would be for

secret acquisitions of European companies, an explanation LGT Bank accepted. By September

1998, Olympus deposited Japanese government bonds valued at about V21 billion with LGT

Bank. This was the first loss separation scheme.

69. The scheme as developed and executed by September 1998, was reported by

Yamada and Mori to Kishimoto and approved by him. The scheme was also told to Ota,

Olympus' then General Manager of the Accounting Department, since the scheme as

implemented would affect, inflate and distort the Company's accounting records. In June 1999,

Kikukawa became the executive managing director in charge of the Finance and Accounting

Department. By January 2000, at the latest, Yamada reported to Kikukawa the existence and

actual implementation of the scheme. According to the IR, "Kikukawa acknowledged that, by

January 2000 at the latest, he was aware of the facts surrounding the existence and execution of the loss separation scheme." JR at 18.

70. In June 2001, Kikukawa became the President and Yamada and Mori reported approximately twice yearly at meetings attended by Kishimoto, Kikukawa and Ota on the status of the underwater financial assets that had been separated from Olympus and maintained by the off-balance sheet Receiver Funds.

71. The Loss Disposition Scheme that Yamada and Mori worked out, and that was approved by top management, including Kikukawa, required that the Receiver Funds receive financing so that they could acquire the poor investments from Olympus at book value. To get

23 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 27 of 111

this money into the Receiver Funds, Olympus set up three secret routes: the European route, a

Singapore route, and a domestic (i.e., Japanese) route.

(a) The European Route. From 1997 to 1998, Olympus set up, as the

Receiver Funds - Central Forest Corp ("CFC") and Quick Progress Co. ("QP"). Olympus had

LGT Bank provide a credit line of Y30 billion to the CFC and had Y30 billion loaned to CFC

under the pledge of the deposit in the name of Olympus with the LGT Bank. Also, in 2000,

Olympus with its subsidiary company, Olympus Asset Management Ltd. ("OAM') invested 35

billion in total into a class fund managed by the LGT Bank and subsequently flowed the money

into the CFC via separately set-up funds called TEAO Limited ("TEAO"), Neo Strategic

Venture, L.P. ("Neo") and QP. Thus, from 1998 to 2000, V 65 billion was transferred into the

scheme. See JR at 20-24.

(b) The Singapore Route. In 2000, Olympus had the Commerzbank in

Singapore provide a loan of =Y45 billion to a special purpose company under the pledge of the

deposit in the name of Olympus with the bank, and transferred money into CFC via funds that

Olympus established entitled Twenty First Century Global Fixed Income Fund Ltd. ("2 IC").

Later the Singapore Route was changed in the structure, and in the end Olympus invested Y=60

billion into the SG Bond Plus Fund ("SO Bond") and lent the bond portfolio invested by the SG

Bond to Easterside Investments Limited ("Easterside"). Thus, from 2000 to 2005 V60 billion

flowed into the scheme. See IR at 2528 .2

According to the FBI, the SG Bond was set up in the Cayman Islands in or about early 2005 by Chan Ming Fon ("Chan") who was himself directed and aided by Olympus and its top management to facilitate the tobashi scheme described herein. The U.S. Justice Department has filed criminal charges against Chan who has corroborated a substantial portion of the allegations. See Sealed Complaint, US. v. Chan Ming Fon, No. 12-MAG-3307 (S.D.N.Y., Dec. 20, 2012). For his services, Olympus paid Chan over $10 million. See id. ¶ II. 24 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 28 of 111

(c) The Domestic (i.e., Japanese) Route. On March 1, 2000, Olympus set up a business investment fund called G.C. New Vision Ventures, L.P. ("GCNVV"). The purpose of

GCNVV was to give Olympus an entity through which it could channel money into to the relevant Receiver Funds. The General Partner of GCNVV was GCI Cayman Co. ("GCI

Cayman"), a wholly owned subsidiary of GC and an entity established by Yokoo, who was

Yamada's contact at GC and who had a relationship with LGT Bank. GCI Cayman invested

100 million (which was offset and recouped). The limited partners of GVNCC were Olympus itself, which invested V30 billion, and Genesis Venture Capital Series 1 Ltd. ("GV") which invested V5 billion. GV received funds via the European and Singapore routes and thus indirectly from Olympus. Ultimately, Olympus provided all of GCNVV's funding. GCNVV was established with a 10 year term and thus set to expire in March 2010. Moreover, as per the agreement which established GCNVV, Olympus had final investment decision-making authority.

Kikukawa chaired the committee at Olympus that reviewed the deals to be made by GCNVV.

Between 2000 and 2005 GCNVV would go on to invest in some 30 ventures between 2000 and

2005 and ultimately sent roughly Y30 billion to QP - a Receiver Fund set up by Olympus to hold approximately Y32 billion in carried losses. See IR at 28-32.

72. Through these routes and sham entities, Olympus funded entities that would buy its poor investments and thus transferred from its own books roughly V 100 billion in losses: Y64 billion to the Receiver Fund CFC as well as the loss of about V32 billion yen to QP. However, because Olympus obtained the financing for the Receiver Funds by pledging its bank deposits, the loans needed to be repaid and the money invested into the Receiver Funds to be reimbursed.

To do so, Olympus would go on a shopping spree, acquiring high priced corporate entities and

25 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 29 of 111

paying exorbitant advisory fees in the process. By doing so, Olympus would repay the loans

and dispose of its losses completely.

C. Olympus Tries to Settle The Losses And Bring The Tobashi To An End

73. The excess payments Olympus would make for overpriced companies and

absurdly high advisory fees would go to the off-balance-sheet entities to make them whole.

That "cost" would be put on the Company's balance sheet as good will which could then be

amortized - written off— over a number of years. Once that was done, the balance sheet would

show an accurate value for Olympus.

(1) The "Mickey Mouse" Companies - Altis, News Chef and Humalabo

74. To accomplish this, appropriate corporate targets needed to be identified. From

2003 through 2005, Olympus found three companies that fit the bill - Altis, News Chef, and

Humalabo. Altis was in the business of disposing of and recycling plastic infectious medical

waste (e.g., syringes). News Chef developed and sold microwave cooking containers.

Humalabo sold processed foods using shiitake mushroom mycelium culture extract, which

supposedly improved the immune system. The three had nothing in common with Olympus and no meaningful business record. In fact, Yamada and Mori wrote a business plan for the them in an effort to justify the high price that Olympus would later pay to acquire them. IR at 36.

Woodford referred to them as the three "Mickey Mouse" companies. Exposure at 9, 22, 40, 47,

129, 185.

75. The three domestic companies were acquired as follows: (a) the Funds were to subscribe shares at a low price of V40,000 to Y200,000 per share in the Mickey Mouse companies so as to increase the share capital; and, (b) Olympus would buy the shares from the funds at a substantially higher price of between Y 5 million and Y20 million per share. This

26 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 30 of 111

would be based on a bogus business plan that assumed the high growth of the businesses (which

Yamada and Mori fabricated). Olympus' Funds acquired shares in the three domestic

companies for about Y700 million: Y50,000 per share for Altis and Humalabo and Y200,000 per

share for News Chef. In March 2006, GCNVV bought some shares in the three domestic

companies from Neo and New Investment Ltd. Class Fund IT Ventures ("ITV") for about Y 10.8

billion at Y5.79 million per share for Altis, Y 14,375 million per share for Humalabo and Y 4.45

million per share for News Chef. At the same time, Dynamic Dragon II SPC ("DD") and

Global Targets SPC ("GT') - which were set up at the request of Olympus - bought from Neo

some shares in the three domestic companies for about Y8 billion at Y 5.57 million per share for

Altis, Y14.1 million per share for Humalabo and Y4.45 million per share for News Chef. See JR

at 35-42.

76. Changes to the accounting rules in 2007 would require a number of Olympus' off-

balance sheet investment entities to be consolidated into the consolidated financial statements of

Olympus.3 Thus, GCNVV could no longer remain an off-balance sheet entity. However, once

GCNVV and its major investors were consolidated with Olympus, a concern arose that the

auditor's oversight of GVNCC would grow stronger, which might reveal the scheme. As a

result, effective September 21, 2007, Olympus decided to cancel, in mid-course, the limited

partnership agreement for GCNVV without waiting for its natural 2010 expiration date. As a

result, the shares held by GCNVV in the three domestic companies were transferred to

The accounting changes that were coming to Japan were already in place in the United States following the Enron scandal. In 2001, Enron Corp. collapsed revealing in the process the myriad ways in which it concocted phony profits - i.e., "selling" assets to off-balance-sheet entities it controlled and booking profits on those sales. Following years of negotiations, accounting rules in the United States were revised to address these tricks and by 2007 Japanese accounting rules were to be changed to reflect those revisions. As a result, shell companies would now have to be consolidated and Olympus had until March 31, 2008 - the end of its fiscal year to clean up its books. 27 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 31 of 111

Olympus. Olympus thus hastily acquired the three domestic companies by acquiring GCNVV

at its book value. As part of the termination, however, Olympus had to pay GCI Cayman, the

general partner of GCNVV, approximately YI.7 billion as a fee for the mid-term termination of

the agreement. (The costs for running the scheme, such as this mid-termination fee, would

eventually exceed Y134 billion, greater than the Yl 17 billion in unrealized losses that Olympus

originally sought to hide). See IR at 42.

77. In March 2008, after it undertook the mid-course termination of GCNVV in order

to comply with the new accounting rules, Olympus bought the shares of the three domestic

companies from Neo for =V31.9 billion and from ITV for 15.2 billion (at 11 million per share

for Altis, V2.5 million per share for Humalabo and 9.5 million per share for News Chef).

Olympus also bought in April 2008 the shares of the three domestic companies via a subsidiary

finance company called Olympus Finance Hong Kong Limited ("OFF"), for about 9.6 billion

from DD, and about V4.1 billion from GT (at the price of VI0.5 million per share for Altis,

19.5 million per share for Humalabo and =V9 million per share for News Chef). In that way,

Olympus obtained the shares of the three domestic companies for about Y73.2 billion -

significantly above what they were worth and what the shell companies paid for them. See IR at

43-46.

78. When Olympus finally purchased the three domestic companies from the off balance sheet entities that it set up - Neo, OFH, ITV, etc. - Yamada reported to Kikukawa the terms and nature of the overvaluation of the three domestic companies. Recognizing the overvaluation as an essential part of the scheme to settle the Company's investment losses,

Kikukawa approved the purchases and stated "El Let's move ahead based on this.... We absolutely must do something about the Three Domestic Companies. I will also cooperate with

28 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 32 of 111

you.... If things go well, the losses will decrease by a large amount won't it' and thus

expressed a stance of actively addressing the resolution of the [Company's fraudulent scheme]

on his own." JR at 76.

79. The billions of yen that the various entities - Neo, OFH and ITV and others -

received for the three domestic companies was now able, through the use of other Receiver

Funds, flow back to Olympus. Among others, money from the sale of the three domestic

companies was used to repay the loan provided by LGT Bank which then released the deposit

that Olympus had put up for the loan.

80. In December 2008, KPMG AZSA LLC expressed doubts to the Olympus Board

of Auditors about the decision to purchase the three domestic companies in light of the fact that

the companies had little or no business record and that the acquisition price for the shares was

very high and paid to investment funds. In March 2009, despite the fact that KPMG AZSA

LLC did not accept the Company's explanations, it allowed Olympus to recognize an

impairment loss of Y55.7 billion for the goodwill of the three domestic companies, which was

followed by another impairment loss of Y1.3 billion in the fiscal term ended March 2010.

Through this process, "Olympus undertook final recognition of a portion of the losses that had been hidden." IR at 48.

Defendants also attempted to settle losses through gains on the price of the stock in ITX Corporation ("lix"), a company engaged in information and communication services. Unfortunately, the investment in ITX turned out to be a poor one and resulted in additional losses by ITV and other funds, all of which Olympus had to cover as part of the fraud. See JR at 32-34. 29 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 33 of 111

(2) Defendants Grossly Overpay for Gyrus

81. The purchase and writedown of the three domestic companies, however, was not

sufficient to repay all the loans and settle all the investment losses that Olympus had been

hiding. In February 2008, through the acquisition of Gyms, Olympus would be able to settle

the scheme and end its decade-long fraud.

82. The acquisition of Gyms had its origin in June 2006 when the Company entered

into a financial advisor agreement (the "FA Agreement") with Axes in anticipation of a major

acquisition of a wholly different company (other than Gyrus). Kikukawa signed the FA

Agreement as the representative of Olympus. The FA Agreement provided that share options in

connection with the corporate acquisition were to be granted to Axes. The purpose of the share

option was to allow Olympus to buy back the shares at inflated prices to help cover the

investment losses. See IR at 50-53.

83. When discussions fell through in connection with the anticipated corporate target,

Olympus turned its sights on Gyrus. Unfortunately, Gyrus was a much smaller acquisition than

Olympus had original intended and would thus not be large enough to serve the scheme's purpose. Yamada and Mori grew concerned about this and revised the FA Agreement in June

2007 to change the completion fee (the "Revised FA Agreement"). Kikukawa signed the

Revised FA Agreement as the representative of Olympus. See IR at 50-56.

84. The Revised FA Agreement provided that upon the completion of the acquisition,

$12 million in cash, share options and warrants with respect to Gyrus would be paid and given as the completion fee to Axes. It was agreed that such an amount would cover the most of

Olympus' remaining investment losses still existing at that time. In June 2008, Axes sold the share option and the warrant to a Cayman entity, Axam for $24 million. Besides the completion

30 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 34 of 111

fee, Olympus paid Axes a basic fee of $5 million and expenses of $7 million. By the end of

2008, Axes paid $12.2 million in total out of the fee and expenses received, to an overseas

entity who assisted in Gyms acquisition. See IR at 53-56.

85. The Medical Business section of Olympus had been considering the capital

reorganization of Gyrus since right after the acquisition. It requested that the share option and

the warrant granted to Axes be bought back. The accounting section of Olympus computed the

market value of the share option to be about $177 million at the exchange rate at that time. The

accounting section made a mistake in the computation in that they considered a price with a

large premium over the market price, which made the share option overvalued. However,

Yamada and Mori, who intended to transfer more than $177 million dollars into the Funds,

decided to pay for the share option by preference shares in Gyrus and not cash, and to buy them

back in the future. See JR at 56-62.

86. In September 2008, Olympus canceled the shares options and instead issued to

Axam preference shares in Gyrus (par value $176,981,106 dollars). Olympus also bought back the warrant for $50 million. The preferred or preference shares gave the right to receive

dividends equivalent to 85% of the balance between the interest accrued by cash deposit and

internal loan of Gyrus and expenses and taxes. Olympus gave Axam prefereed shares with the right to repurchase them at a later time. Also, in October 2008, Olympus, Gyrus and Axam amended the share subscription agreement under which Gyrus needed to obtain approval from

Axam in making decisions on material business and disposal of assets. Once again, Kikukawa signed as the representative of Olympus. See JR at 63-64.

87. In addition to signing all the necessary documentation to effectuate the Gyrus deal, Kikukawa had frequent discussions with Yamada and Mori regarding the progress of the

31 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 35 of 111

deal and the possibility of repurchasing the dividend preferred shares from Axes. In one such

discussion, Kikukawa asked Yamada and Mori, "What do you think? Can it all be eliminated?"

And at the end of their discussion, said: "It will be nice if this were the end." IR at 77.

88. In November 2008, Axam requested Olympus to either consent to the assignment

of the share subscription agreement to a third party, or purchase back the dividend preference

shares at price between $530 million and $590 million dollars, based on Axam's need of the

money. In November 2008, the Board of Olympus consented to the repurchase of all dividend

preference shares within the $530 to $590 million price range based on the reasoning that the

assignment of dividend preference shares to third parties should be avoided. See JR at 65-67.

89. The Gyrus dividend preference shares, however, were not repurchased until the

auditing firm was replaced. There were outstanding accounting issues, and KPMG AZSA LLC

pointed out that the FA fee to Axes/Axam was too expensive. Yamada and Mori discussed the

accounting issues with the Company's new auditor, Ernst & Young ShinNihon LLC, and in

March 2010, the new auditor approved recording the difference between the price Olympus would repurchase the Gyrus dividend preference shares from Axam ($620 million) and their book value (approximately $177 million) as goodwill. See JR at 65-67.

90. In order to adjust the final purchase price of the Gyrus dividend preference shares at $620 million dollars, Mori first had the amount requested by Axam to be raised to $724 million - the amount necessary to cancel the SG Bond (as part of the Singapore route). Next, after disguising a price negotiation, Mori eventually had the dividend preference shares repurchased at $620 million in March 2010. The sale and purchase agreement for the dividend preference shares was executed on March 22, and on March 25 the money was successfully

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wired to Axam. On June 30, the registration in the Cayman Islands of Axam, whose purpose was completed, was cancelled. See IR at 67-70.

91. The $50 million purchase price of the warrant paid to Axam by Olympus in

September 2008 was then transferred from GPAI to Axam, and V-4.1 billion was wired to SG

Bond via 21C and Easterside. Also, the $620 million purchase price of the dividend preference shares paid to Axam by Olympus in March 2010 was wired to SG Bond via GPAI, CD and

Easterside. As a result, Y63.2 billion yen was redeemed from SG Bond by March 2011, and the

Singapore route was finally settled. See IR at 72-74.

92. Eventually, part of the compensation paid to Axes and Axam, the book value of the stock options, the purchase price of the warrants, along with the purchase price of the dividend preference shares for Gyrus, were recorded as goodwill and written off. See JR at 75.

93. With that final step concluded, Olympus, Kikukawa, Takayama, and the

Company's top officers and directors may have believed that they successfully hid and had now erased from the Company's books, the investment losses that had been incurred years ago.

Unbeknownst to them, however, certain employees at the Company who knew of the fraud, or portions of it, sought to expose it. When the fraud was exposed, the Company was ultimately forced to admit the existence of the losses, the extensive efforts the Company and its top officers and directors took to cover it up, and the fact that for many years the Company's financial statements were materially and knowingly false.

33 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 37 of 111

VIII. OLYMPUS ISSUES FALSE AND MISLEADING STATEMENTS

94. Prior to and throughout the Class Period, Olympus issued issued numerous

statements that were false and misleading in that they materially exaggerated the Company's

income and materially understated the Company's losses. Defendant Kikukawa, along with

Mori and Yamada (among others), were responsible for the accuracy of these Olympus financial

statements. These individuals knew that such statements would be disseminated to the public.

They also knew that these statements were false and misleading because the statements were

issued with the express purpose of masking Olympus' substantial trading losses through the

sham corporate transaction payments alleged above.

95. Throughout the Class Period, the Company reported a robust and healthy balance

sheet, with strong retained earnings, shareholders equity, net assets, investment securities and total assets. According to its Annual Reports for 2006 through 2011, Olympus reported the following financial results:

Olympus Core Financial Metrics - Originally Disclosed IJPY Million] Year Retained Shareholders Total Net Investment Total Assets Earnings Equity Assets Securities 2006 153,864 290,656 300,313* 208,459 976,132 2007 191,122 310,239 344,871 216,636 1,091,800 2008 237,817 356,564 367,876 193,843 1,358,349 2009 110,407 218,914 168,318 127,144 1,106,318 2010 168,238 267,600 216,891 140,271 1,152,227 2011 170,439 262,462 166,836 59,342 1,063,593 Not reported in Annual Report tor 2006, but reported and restated in subsequent financial statements (as detailed herein).

34 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 38 of 111

96. As the Company would later admit (along with restated financial statements correcting its false financial statements, as detailed below), these core financial metrics were materially false and vastly overstated. As further detailed herein, the corrected and restated financials were as follows:

Olympus Core Financial Metrics - Corrected & Restated [JPV Million] Year Retained Shareholders Total Net Investment Total Assets Earnings Equity Assets Securities 2006 35,512 172,476 182,133 96,175 888,619 2007 71,933 191,050 224,951 104,996 1,002,665 2008 115,285 234,032 244,281 94,006 1,217,172 2009 52,124 160,631 111,907 62,589 1,038,253 2010 114,719 214,081 163,131 78,448 1,104,528 2011 113,532 205,555 115,579 59,432 1,019,160

97. The amounts by which the Company overstated these core financial metrics are as follows:

Olympus Core Financial Metrics Original v. Corrected: Amount of Overstatement [JPV Million] Year Retained Shareholders Total Net Investment Total Assets Earnings Equity Assets Securities 2006 118,419 118,180 118,180 112,284 87,513 2007 119,189 119,189 119,920 111,640 89,135 2008 122,532 122,532 123,595 99,837 141,177 2009 58,283 58,283 56,411 64,555 68,065 2010 53,519 53,519 53,760 61,823 47,699 2011 56,907 56,907 51,257 0 44,433

35 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 39 of 111

98. The percentages by which the Company overstated these core financial metrics

are as follows:

Olympus Core Financial Metrics Original v. Corrected: Percentage of Overstatement Year Retained Shareholders Total Net Investment Total Assets Earnings Equity Assets Securities 2006 76.9% 40.7% 39.4% 53.9% 9.0% 2007 62.4% 38.4% 34.8% 51.5% 8.2% 2008 51.5% 34.4% 33.6% 51.5% 10.4% 2009 52.8% 26.6% 33.5% 50.8% 6.2% 2010 31.8% 20.0% 24.8% 44.1% 4.1% 2011 33.4% 21.7% 30.7% 0% 4.2%

99. For the reasons stated by the Company and as detailed herein, Olympus' annual

reports during the Class Period were false and misleading because they contained financial

information that Kikukawa, Mori, Yamada and other top Olympus managers knew or recklessly

disregarded was materially false and misleading as a result of the tobashi alleged herein.

100. Between November 7, 2006, and August 5, 2011, Olympus issued at least 18 year end and interim financial statements. These financial statements are attached hereto as Exhibits

1-18, incorporated herein by reference, and can be found at http://www.olympus- global.comlenlinfo/201 lb/ifl 1 l228corpe.html#footernaviAnc. These financial statements, in addition to other Class Period statements identified herein, were all false and misleading and were later corrected by Olympus. The financial statements identified below in paragraphs 101-

118, and attached hereto as Exhibits 1-18, all vastly overstated the Company's core financial metrics, including, among others, retained earnings, shareholders equity, net assets, investment securities and total assets.

101. On November 7, 2006, the Company issued its Summary of Non-Consolidated

Financial Statements for the Interim Period Ended September 30, 2006. On April 26, 2012, the

36 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 40 of 111

Company issued a corrected version which restated numerous financial figures that were falsely

presented in the original filing and that provided additional previously undisclosed information

about the Company's efforts to misrepresent its financials. A copy of the Company's notice of

correction, along with the original and corrected versions of the filing can be found at

http://www.olympus-global.comlenlcorc/ir/brief/pdf/n06 11 O7aE2_corrected.pdf and is attached

hereto as Exhibit I and incorporated herein by reference. As detailed in the attached Exhibit 1,

those portions of the corrected version where Olympus corrected its false financial information

are underlined.

102. On November 7, 2006, the Company issued its Consolidated Financial Results for

the Interim Period Ended September 30, 2006. On April 26, 2012, the Company issued a

corrected version which restated numerous financial figures that were falsely presented in the

original filing and that provided additional previously undisclosed information about the

Company's efforts to misrepresent its financials. A copy of the Company's notice of correction,

along with the original and corrected versions of the filing can be found at http://www.olympus-

global.com/enlcorc/ir/brief/pdf/n06 11 O7aE_corrected.pdf and is attached hereto as Exhibit 2

and incorporated herein by reference. As detailed in the attached Exhibit 2, those portions of

the corrected version where corrections were made are underlined.

103. On May 8, 2007, the Company issued its Consolidated Financial Results for the

Fiscal Year Ended March 31, 2007. On December 28, 2011, the Company issued a corrected

version which restated numerous financial figures that were falsely presented in the original

filing and that provided additional previously undisclosed information about the Company's efforts to misrepresent its financials. A copy of the Company's notice of correction, along with the original and corrected versions of the filing can be found at http://www.olympus-

37 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 41 of 111

global.com/en/corc/ir/brief/Pdf/n07O6l3aE —corrected.pdf and is attached hereto as Exhibit 3

and incorporated herein by reference. As detailed in the attached Exhibit 3, those portions of

the corrected version where corrections were made are underlined.

104. On November 6, 2007, the Company issued its Consolidated Financial Results for

the Interim Period Ended September 30, 2007. On April 26, 2012, the Company issued a

corrected version which restated numerous financial figures that were falsely presented in the

original filing and that provided additional previously undisclosed information about the

Company's efforts to misrepresent its financials. A copy of the Company's notice of correction,

along with the original and corrected versions of the filing can be found at http://www.olympus-

global.com/en/corc/ir/brief/pdf/n07 11 O6aE_n_corrected.pdf and is attached hereto as Exhibit 4

and incorporated herein by reference. As detailed in the attached Exhibit 4, those portions of

the corrected version where corrections were made are underlined.

105. On May 8, 2008, the Company issued its Consolidated Financial Results for the

Fiscal Year Ended March 31, 2008. On December 28, 2011, the Company issued a corrected

version which restated numerous financial figures that were falsely presented in the original

filing and that provided additional previously undisclosed information about the Company's

efforts to misrepresent its financials. A copy of the Company's notice of correction, along with the original and corrected versions of the filing can be found at http://www.olympus- global.comlen/corc/ir/brief/pdf/n0805 1 5aE_n_corrected.pdf and is attached hereto as Exhibit 5 and incorporated herein by reference. As detailed in the attached Exhibit 5, those portions of the corrected version where corrections were made are underlined.

106. On August 1, 2008, the Company issued its Consolidated Financial Results for the

First Quarter of the Fiscal Year Ended March 31, 2009. On April 26, 2012, the Company

38 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 42 of 111

issued a corrected version which restated numerous financial figures that were falsely presented

in the original filing and that provided additional previously undisclosed information about the

Company's efforts to misrepresent its financials. A copy of the Company's notice of correction,

along with the original and corrected versions of the filing can be found at http://www.olympus-

global.comlenlcorc/ir/brief/pdf/n08080 1 aE_n_corrected.pdf and is attached hereto as Exhibit 6

and incorporated herein by reference. As detailed in the attached Exhibit 6, those portions of

the corrected version where corrections were made are underlined.

107. On November 6, 2008, the Company issued its Consolidated Financial Results for

the Six Months of the Fiscal Year Ending March 31, 2009. On April 26, 2012, the Company

issued a corrected version which restated numerous financial figures that were falsely presented

in the original filing and that provided additional previously undisclosed information about the

Company's efforts to misrepresent its financials. A copy of the Company's notice of correction,

along with the original and corrected versions of the filing can be found at http://www.olympus-

global.comlenlcorc/ir/brief/pdf/n08 11 O6aE_n_corrected.pdf and is attached hereto as Exhibit 7

and incorporated herein by reference. As detailed in the attached Exhibit 7, those portions of

the corrected version where corrections were made are underlined.

108. On February 6, 2009, the Company issued its Consolidated Financial Results for the Nine Months of Fiscal Year Ending March 31, 2009. On December 28, 2011, the Company

issued a corrected version which restated numerous financial figures that were falsely presented

in the original filing and that provided additional previously undisclosed information about the

Company's efforts to misrepresent its financials. A copy of the Company's notice of correction, along with the original and corrected versions of the filing can be found at http://www.olympus- global .com/en/corc/ir/brief/pdf/n0902 1 6aE_n_corrected.pdf and is attached hereto as Exhibit 8

39 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 43 of 111

and incorporated herein by reference. As detailed in the attached Exhibit 8, those portions of

the corrected version where corrections were made are underlined.

109. On May 12, 2009, the Company issued its Consolidated Financial Results for the

Fiscal Year Ended March 31, 2009. On December 28, 2011, the Company issued a corrected

version which restated numerous financial figures that were falsely presented in the original

filing and that provided additional previously undisclosed information about the Company's

efforts to misrepresent its financials. A copy of the Company's notice of correction, along with

the original and corrected versions of the filing can be found at http://www.olympus-

global.comlen/corc/ir/brief/pdf/nO9O525aEncorrected.pdf and is attached hereto as Exhibit 9

and incorporated herein by reference. As detailed in the attached Exhibit 9, those portions of the corrected version where corrections were made are underlined.

110. On August 6, 2009, the Company issued its Consolidated Financial Results for the

Three Months of Fiscal Year Ending March 31, 2010. On December 28, 2011, the Company

issued a corrected version which restated numerous financial figures that were falsely presented

in the original filing and that provided additional previously undisclosed information about the

Company's efforts to misrepresent its financials. A copy of the Company's notice of correction, along with the original and corrected versions of the filing can be found at http://www.olympus- global.comlen/corc/ir/brief/pdf/n09082 1 aE_nconected.pdf and is attached hereto as Exhibit 10 and incorporated herein by reference. As detailed in the attached Exhibit 10, those portions of the corrected version where corrections were made are underlined.

111. On November 6, 2009, the Company issued its Consolidated Financial Results for the Six Months of Fiscal Year Ending March 31, 2010. On December 28, 2011, the Company issued a corrected version which restated numerous financial figures that were falsely presented

40 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 44 of 111

in the original filing and that provided additional previously undisclosed information about the

Company's efforts to misrepresent its financials. A copy of the Company's notice of correction,

along with the original and corrected versions of the filing can be found at http://www.olympus-

global.comlenlcorc/ir/brief/pdf/n09 111 3aE_n_corrected.pdf and is attached hereto as Exhibit 11

and incorporated herein by reference. As detailed in the attached Exhibit 11, those portions of

the corrected version where corrections were made are underlined.

112. On February 10, 2010, the Company issued its Consolidated Financial Results for

the Nine Months of Fiscal Year Ending March 31, 2010. On December 28, 2011, the Company

issued a corrected version which restated numerous financial figures that were falsely presented

in the original filing and that provided additional previously undisclosed information about the

Company's efforts to misrepresent its financials. A copy of the Company's notice of correction,

along with the original and corrected versions of the filing can be found at http://www.olympus-

global.com/en/corc/ir/brief/pdf/nlO02l7aEncorrected.pdf and is attached hereto as Exhibit 12

and incorporated herein by reference. As detailed in the attached Exhibit 12, those portions of the corrected version where corrections were made are underlined.

113. On May 11, 2010, the Company issued its Consolidated Financial Results for the

Fiscal Year Ending March 31, 2010. On December 28, 2011, the Company issued a corrected version which restated numerous financial figures that were falsely presented in the original filing and that provided additional previously undisclosed information about the Company's efforts to misrepresent its financials. A copy of the Company's notice of correction, along with the original and corrected versions of the filing can be found at http://www.olympus- global.com/en/corc/ir/brief/pdf/nlO0524aEncorrected.pdf and is attached hereto as Exhibit 13

41 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 45 of 111

and incorporated herein by reference. As detailed in the attached Exhibit 13, those portions of

the corrected version where corrections were made are underlined.

114. On August 5, 2010, the Company issued its Consolidated Financial Results for the

Three Months of the Fiscal Year Ending March 31, 2011. On December 28, 2011, the

Company issued a corrected version which restated numerous financial figures that were falsely

presented in the original filing and that provided additional previously undisclosed information

about the Company's efforts to misrepresent its financials. A copy of the Company's notice of

correction, along with the original and corrected versions of the filing can be found at

http://www.olympus-global.comlenlcorc/ir/brief/pdf/n 10081 7aEn_corrected.pdf and is

attached hereto as Exhibit 14 and incorporated herein by reference. As detailed in the attached

Exhibit 14, those portions of the corrected version where corrections were made are underlined.

115. On November 5, 2010, the Company issued its Consolidated Financial Results for the Six Months of the Fiscal Year Ending March 31, 2011. On December 28, 2011, the

Company issued a corrected version which restated numerous financial figures that were falsely presented in the original filing and that provided additional previously undisclosed information about the Company's efforts to misrepresent its financials. A copy of the Company's notice of correction, along with the original and corrected versions of the filing can be found at http://www.olympus-global.com/en/corc/ir/brief/Pdf/n 10111 2aE_n_corrected.pdf and is attached hereto as Exhibit 15 and incorporated herein by reference. As detailed in the attached

Exhibit 15, those portions of the corrected version where corrections were made are underlined.

116. On February 10, 2011, the Company issued its Consolidated Financial Results for the Nine Months of the Fiscal Year Ending March 31, 2011. On December 28, 2011, the

Company issued a corrected version which restated numerous financial figures that were falsely

42 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 46 of 111

presented in the original filing and that provided additional previously undisclosed information

about the Company's efforts to misrepresent its financials. A copy of the Company's notice of

correction, along with the original and corrected versions of the filing can be found at

http://www.olympus-global.comlen/corc/ir/brief/pdf/n 11021 7aE_n_corrected.pdf and is

attached hereto as Exhibit 16 and incorporated herein by reference. As detailed in the attached

Exhibit 16, those portions of the corrected version where corrections were made are underlined.

117. On May 11, 2011, the Company issued its Consolidated Financial Results for the

Fiscal Year Ending March 31, 2011. On December 28, 2011, the Company issued a corrected

version which restated numerous financial figures that were falsely presented in the original

filing and that provided additional previously undisclosed information about the Company's

efforts to misrepresent its financials. A copy of the Company's notice of correction, along with

the original and corrected versions of the filing can be found at http://www.olympus-

global.com/enlcorc/irfbrief/pdf/nll05l9aEncorrected.pdf and is attached hereto as Exhibit 17

and incorporated herein by reference. As detailed in the attached Exhibit 17, those portions of the corrected version where corrections were made are underlined.

118. On August 5, 2011, the Company issued its Consolidated Financial Results for the

Three Months of the Fiscal Year Ending March 31, 2012. On December 28, 2011, the

Company issued a corrected version which restated numerous financial figures that were falsely presented in the original filing and that provided additional previously undisclosed information about the Company's efforts to misrepresent its financials. A copy of the Company's notice of correction, along with the original and corrected versions of the filing can be found at http://www.olympus-global.com/en/corc/ir/brief/Pdf/nl 10 823aE_n_corrected.pdf and is

43

Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 47 of 111

attached hereto as Exhibit 18 and incorporated herein by reference. As detailed in the attached

Exhibit 18, those portions of the corrected version where corrections were made are underlined.

119. The Company's financials, as attached hereto as Exhibits 1 through 18, and as

restated by the Company, were all materially false and known to be so by Kikukawa, Mori,

Yamada and other Olympus officers. The false financial statements described above in

paragraphs 100-118 misrepresented the Company's core and fundamental financial metrics,

vastly overstating the Company's retained earnings, shareholders equity, net assets, investment

securities and total assets, among others.

120. Below is a chart detailing the Company's retained earnings, shareholders equity,

net assets, investment securities and total assets, as originally reported:

Olympus Core Financial Metrics - Originally Disclosed V Million] Total Retained Shareholders Investment Total Fiscal Period* Net Earnings Equity Securities Assets Assets FYE 3/31/2006 (Non-Cons.) 102,195 234,220 234,220 137,665 512,057 WE 9/30/2006 (Non-Cons.) 106,124 225,473 238,213 141,620 510,320 FYE 3/31/2006 153,864 290,656 300,313 208,459 976,132 WE 9/30/2006 168,599 287,948 317,389 209,682 982,718 FYE 3/31/2007 191,122 310,239 344,871 216,636 1,091,800 IPE9/30/2007 216,522 335,413 372,473 214,634 1,110,835 FYE 2008 237,817 356,564 367,876 193,843 1,358,349 3 months FYE 3/31/2009 240,042 348,764 366,948 198,826 1,398,246 6 months FYE 3/31/2009 237,292 345,856 343,910 174,938 1,307,634 9 months FYE 3/31/2009 200,511 309,035 241,281 135,426 1,195,106 FYE3/31/2009 110,407 218,914 168,318 127,144 1,106,318 3 months FYE 3/31/2010 108,677 225,909 185,941 140,233 1,104,785 6 months FYE 3/31/2010 160,925 260,293 204,298 141,978 1,137,600 9 months FYE 3/31/2010 164,762 264,126 214,952 143,877 1,128,901 FYE 3/31/2010 168,238 267,600 216,891 140,271 1,152,227 3 months FYE 3/31/2011 165,051 264,412 185,922 129,321 1,097,071 6 months FYE 3/31/2011 170,597 269,956 180,482 95,216 1,063,177 9 months FYE 3/31/2011 168,178 257,536 1 160,173 96,584 1,049,382

44

Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 48 of 111

FYE 3/31/2011 170,439 166,836 59,342 1 3 months FYE 3/31/2012 164.038 151.147 57.213 1 *F[E = Fiscal Year Ended *IPE = Interim Period Ended

121. Below is a chart detailing the Company's retained earnings, shareholders equity,

net assets, investment securities and total assets, as corrected:

Olympus Core Financial Metrics - Corrected & Restated V Million] Total Retained Shareholders Investment Total Fiscal Period* Net Earnings Equity Securities Assets Assets FYE 3/31/2006 (Non-Cons.) (16,224) 115,972 115,972 62,708 393,928 IPE 9/30/2006 (Non-Cons.) (13,179) 106,170 118,581 65,818 390,462 FYE 3/31/2006 35,512 172,476 182,133 96,175 888,619 IPE 9/30/2006 49,576 168,925 197,928 97,060 894,260 FYE 3/31/2007 71,933 191,050 224,951 104,996 1,002,665 IPE 9/30/2007 95,488 214,379 250,505 108,847 1,019,187 FYE 2008 115,285 234,032 244,281 94,006 1,217,172 3 months FYE 3/31/2009 116,223 224,945 242,103 98,814 1,255,270 6 months FYE 3/31/2009 106,617 215,181 213,303 90,345 1,165,187 9 months FYE 3/31/2009 70,346 178,870 111,766 71,064 1,056,719 FYE3/31/2009 52,124 160,631 111,907 62,589 1,038,253 3 months FYE 3/31/2010 50,458 167,690 127,438 75,128 1,036,486 6 months FYE 3/31/2010 104,848 204,216 146,810 78,254 1,069,841 9 months FYE 3/31/2010 109,088 208,452 158,239 80,400 1,062,692 FYE3/31/2010 114,719 214,081 163,131 78,448 1,104,528 3 months FYE 3/31/2011 110,316 209,677 132,397 66,166 1,049,066 6 months FYE 3/31/2011 113,964 213,323 128,244 63,648 1,017,186 9 months FYE 3/31/2011 111,952 201,310 109,477 65,032 1,004,939 FYE3/31/2011 113,532 205,555 115,579 59,342 1,019,160 3 months FYE 3/31/2012 107,863 199,834 101,751 57,213 1 1,054,918 *FYh = Fiscal Year Ended *IPE = Interim Period Ended

45

Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 49 of 111

122. Below is a chart detailing the amount by which the Company overstated its

retained earnings, shareholders equity, net assets, investment securities and total assets:

Olympus Core Financial Metrics Original v. Corrected: Amount of Overstatement JPV Million] Total Retained Shareholders Investment Total Fiscal Period* Net Earnings Equity Securities Assets Assets FYE 3/31/2006 (Non-Cons.) 118,419 118,248 118,248 74,957 118,129 IPE 9/30/2006 (Non-Cons.) 119,303 119,303 119,632 75,802 119,858 FYE 3/31/2006 118,352 118,180 118,180 112,284 87,513 IPE 9/30/2006 119,023 119,023 119,461 112,622 88,458 FYE3/31/2007 119,189 119,189 119,920 111,640 89,135 IPE 9/30/2007 121,034 121,034 121,968 105,787 91,648 FYE 2008 122,532 122,532 123,595 99,837 141,177 3 months FYE 3/31/2009 123,819 123,819 124,845 100,012 142,976 6 months FYE 3/31/2009 130,675 130,675 130,607 84,593 142,447 9 months FYE 3/31/2009 130,165 130,165 129,515 64,362 138,387 FYE 3/31/2009 58,283 58,283 56,411 64,555 68,065 3 months FYE 3/31/2010 58,219 58,219 58,503 65,105 68,299 6 months FYE 3/31/2010 56,077 56,077 57,488 63,724 67,759 9 months FYE 3/31/2010 55,674 55,674 56,713 63,477 66,209 FYE 3/31/2010 53,519 53,519 53,760 61,823 47,699 3 months FYE 3/31/2011 54,735 54,735 53,525 63,155 48,005 6 months FYE 3/31/2011 56,633 56,633 52,238 31,568 45,991 9 months FYE 3/31/2011 56,226 56,226 50,696 31,552 44,443 FYE3/31/2011 56,907 56,907 51,257 0 44,433 3 months FYE 3/31/2012 56,175 56,175 49,396 0 42,572 'r Y h = fiscal Year tncied *JPE = Interim Period Ended

46 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 50 of 111

123. Below is a chart detailing the percentage by which the Company overstated its

retained earnings, shareholders equity, net assets, investment securities and total assets:

Olympus Core Financial Metrics Original v. Corrected: Percentage of Overstatement Retained Shareholders Total Investment Fiscal Period* et Total Earningsngs Equity Securities Assets Assets FYE 3/31/2006 (Non-Cons.) 115.9% 50.5% 50.5% 54.4% 23.1% IPE 9/30/2006 (Non-Cons.) 112.4% 52.9% 50.2% 53.5% 23.5% FYE 3/31/2006 76.9% 40.7% 39.4% 53.9% 9.0% IPE 9/30/2006 70.6% 41.3% 37.6% 53.7% 9.0% FYE 3/31/2007 62.4% 38.4% 34.8% 51.5% 8.2% IPE 9/30/2007 55.9% 36.1% 32.7% 49.3% 8.3% FYE 2008 51.5% 34.4% 33.6% 51.5% 10.4% 3 months FYE 3/31/2009 51.6% 35.5% 34.0% 50.3% 10.2% 6 months FYE 3/31/2009 55.1% 37.8% 38.0% 48.4% 10.9% 9 months FYE 3/31/2009 64.9% 42.1% 53.7% 47.5% 11.6% FYE 3/31/2009 52.8% 26.6% 33.5% 50.8% 6.2% 3 months FYE 3/31/2010 53.6% 25.8% 3 1.5% 46.4% 6.2% 6 months FYE 3/3 1/20 10 34.8% 21.5% 28.1% 44.9% 6.0% 9 months FYE 3/31/2010 33.8% 21.1% 26.4% 44.1% 5.9% FYE 3/31/2010 31.8% 20.0% 24.8% 44.1% 4.1% 3 months FYE 3/31/2011 33.2% 20.7% 28.8% 48.8% 4.4% 6 months FYE 3/31/2011 33.2% 21.0% 28.9% 33.2% 4.3% 9 months FYE 3/31/2011 33.4% 21.8% 31.7% 32.7% 4.2% FYE3/31/2011 33.4% 21.7% 30.7% 0.0% 4.2% 3 months FYE 3/31/2012 34.2% 21.9% 32.7% 0.0% 3.9% V Y t = Fiscal Year tnded *IPE = Interim Period Ended

124. In addition to vastly overstating the Company's core financials, the Company also

revealed the nature of its previously undisclosed losses and multi-year effort to mask those

losses. Among others, the corrected financials belatedly identified at least fourteen (14) funds 5

SG Bond Plus Fund; PS Global Investable Markets-O; G.C. New Vision Ventures; Central Forest Corporation; TEAO Limited; Neo Strategic Venture, L.P.; Class Fund IT Ventures; Quick Progress Co. Ltd; Global Targets SPC-Sub Fund H Segregated Portfolio; Dynamic Dragons II, SPC-Sub Fund H Segregated Portfolio; Easterside Investments Limited; 47 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 51 of 111

that were used to "segregate hidden losses on financial assets, derivative transactions" and that

were "substantially controlled by the Company." The corrected financials further stated that:

As the Company incurred large losses from securities investments, derivative transactions, etc., from the 1990's, with the intention of postponing the recognition of the losses, the Company segregated the hidden losses to a number of non-consolidated receiver funds that were to serve as assignee of financial assets, derivative transactions, etc. (collectively, the "Receiver Funds") beginning with the fiscal year ended March 2000. Assets held by the Receiver Funds are presented in bulk as "Investment fund assets" in the interim consolidated balance sheets. This is because the operating assets of the Receiver Funds are, unlike usual investments by the Company, managed in an integrated manner in a series of transaction schemes to segregate and settle the losses. As stated in the section of reason for filing in the amendment report of the Semiannual Securities Report, some board members were aware of the circumstances surrounding the past transactions to segregate and settle the hidden losses. However, as a result of the matters pointed out in the Investigation Report by the Third Party Committee and the Company's internal investigation, it has come to light that the legal form and main platform of asset management of each Receiver Fund, and information on the details of operating assets, appraised value, etc. of each Receiver Fund during the period from the loss segregation to the liquidation of each Receiver Fund, were not fully maintained at the Company. Therefore, the Company prepared the amendment report by obtaining accounting information from outside persons related with the loss segregation and settlement scheme.

125. The corrected financials further state that:

With regard to stock options that were granted in February 2008 to financial advisors for an issue price of US $177 million, the financial advisors offered for the Company to repurchase the options and the Company implemented the repurchase for US$620 million in March 2010. Y41,218 million, which is the amount translated from the difference between US$620 million and US$177 million, was recognized as goodwill as consideration related to the acquisition of Gyrus Group Limited. The fees to the financial advisors were, in reality, paid to the Receiver Funds that were used to segregate hidden losses on financial assets, derivative transactions, etc. through the financial advisors, and were appropriated to settle the hidden losses. Consequently, the Company judged that Y41,218 million of goodwill that was presented in the consolidated balance sheet has no value as goodwill, and is in the process of reversing the goodwill. From the perspective of circulation of funds, Y57,921 million, which is equivalent to US$620 million, was paid in March 2010, and was appropriated to

Twenty-First Century Global Fixed Income Fund Limited; Genesis Venture Capital Series 1 Limited; and Creative Dragon SPC-Sub Fund E. 48 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 52 of 111

settle hidden losses by circulating the funds, through financial advisors, to the Receiver Funds, that were used to segregate hidden losses on financial assets, derivative transactions, etc. Therefore, Y63,222 million, a total of this amount and 5,301 million of consideration for the repurchase of warrants paid in the previous fiscal year, was appropriated to settle hidden losses. Since these funds are circulated to the fund used to segregate hidden losses on financial assets, derivative transactions, etc. as of March 31, 2010, the amount is included in investment fund assets in the consolidated financial statements.

126. Between August 5 and November 7, 2011, the Company issued numerous

statements concerning the Company's financial health, and repeatedly denied that its prior

financial disclosures were false, misleading or incomplete. As detailed below, these statements

were knowingly false and misleading.

IX. WOODFORD ATTEMPTS TO UNCOVER THE TRUTH

127. In April 2011, Michael Woodford was promoted to serve as the Company's

President and Chief Operating Officer. Woodford began his career at Olympus in 1981,

working for the Company's UK distributor at the time, KeyMed (Medical & Industrial

Equipment) Ltd ("KeyMed"). By May 1991, Woodford became Managing Director at KeyMed

and by June 2003 became a member of the board of directors of Olympus KeyMed Group

Limited. In January 2005, Woodford rose again to Executive Managing Director at Olympus

Medical Systems Europa GmbH and became Director and Executive Chairman of KeyMed.

Following his appointment as Company COO, Woodford would soon become the first non-

Japanese person to serve as CEO of a Japanese company.

A. The Facta Articles

128. In the summer and fall of 2011, Facta, a monthly Japanese business news magazine, began reporting about large and irregular payments that Olympus had made in connection with a series of corporate acquisitions. Facta 's first article appeared in the August

2011 edition of the magazine (released on or about July 20, 2011). The article detailed how in 49 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 53 of 111

2008 the Company acquired three money losing companies - including a mail-order cosmetics

and microwave cookery business - that shortly after being acquired fell into insolvency. The

article also pointed out that Olympus paid handsomely for the companies but failed to disclose

anything about them or their acquisitions. In addition, the article discussed the Company's

acquisition of Gyrus as equally suspicious. Not only was the $2 billion price extremely high

(more than half its total assets was good will), but there was also roughly $600 million in Gyrus

preferred stock that Olympus purchased from an undisclosed third party.

129. After the first Facta article became available, Woodford requested, and on or

about August 2, 2011, had a lunch meeting with Kikukawa and Mori to discuss the article. See

Exposure at 22. At that meeting, Woodford asked what the nature of the roughly $1.5 billion in

transactions were, but received an inadequate response. Woodford asked why he had not been

informed of the articles and was told by Kikukawa that he had personally told management not

to report to Woodford the existence of the article on the premise that, as President, Woodford

was too "busy" to be bothered by a Japanese "domestic issue." Id. at 23. Kikukawa and Mon

further stated to Woodford that the articles were "nothing to worry about and simply tabloid,

sensationalist journalism." Letter from Woodford to Mori, Sept. 25, 2011, at 2 (Exhibit 19).

130. Following its initial reporting, Facta issued another article in the October 2011 edition of the magazine and which was released on or about September 20, 2011. The later

Facta articles speculated that "antisocial forces" - Japanese media-speak for the Yakuza

(organized crime syndicates in Japan) - were among the beneficiaries of the questionable transactions.

50 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 54 of 111

B. Woodford Writes to the Board

131. As the recently appointed President and COO of the Company, Woodford was

alarmed by what he read and on September 23, 2011. He wrote a detailed eight-page letter to

Mori, with copies to the Olympus Board (including Defendants Kikukawa and Takayama).

Woodford raised numerous concerns he had with the Company's governance relating to the

transactions that were the subject of the Facta articles. Woodford's letter sought information

about several companies that Olympus had bought over the previous years - including, among

others, Altis, Humalabo, News Chef, Gyms, BioTech and ITX - as well as the replacement of

the Company's auditor from KPMG Azsa & Co. to Ernst & Young Shin-Nihon LLC. 6

132. Soon thereafter Mori orally responded to Woodford's first letter. The following

day, on September 24, 2011, Woodford wrote again to Mori, again copying the Olympus Board

(including Defendants Kikukawa and Takayama), and reiterating his request for information

regarding the Company's recent M&A activity. According to Woodford:

There are numerous questions I would like answered, but to take just one that concerns me greatly, why would any company pay external advisors USD600 million in relation to the purchase of Gyrus for USD2.2 billion? Even more concerning is that the identity of the recipients of these funds has been deliberately withheld from the auditors, with the result that the filed accounts of Gyrus Group Limited in the UK (directors Messrs Kikukawa, Mori and Nambu) were qualified by the auditors, as detailed yesterday.

Woodford then stated that if he did not receive a sufficient response, he would have to take matters into his own hands to obtain the information. According to Woodford:

If I do not receive satisfactory answers then I will insist that independent accountants from an eminent firm are brought in to investigate the various transactions, and to report formally to the Olympus Corporation Board. If this route is closed to me, I will have no alternative but to approach the Japanese

Woodford would eventually write six letters to the Board, all of which are attached hereto as Exhibit 19. 51 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 55 of 111

Regulatory Authorities and the major shareholders, as it is essential that these issues are scrutinised in a thorough and appropriate manner.

133. On September 25, 2011, Woodford again wrote to Mori and the Board (including

Kikukawa and Takayama). Woodford reiterated his concerns about the articles' allegations and

Kikukawa's insistence that management not inform Woodford about them supposedly because

Woodford was "very busy." Woodford explained:

This explanation I found profoundly concerning, both due to the disturbing content of the article and the fact that I meet regularly with the company's shareholders and other interested parties, and should clearly be made aware of such serious allegations of impropriety. This decision not to openly inform me raised concerns of the deliberate withholding of information to me as the President, on the basis that it may embarrass other officers of the company.

Woodford then asked for a copy of the "Third Party Investigation Report," which he had learned the Company had commissioned, and reiterated his request for the information he sought in his

September 23 letter, stated that:

I still insist that I receive written answers to all the questions detailed in my letter of 23 September, in specific and definitive terms. Until I receive this information, there is little point in you, me and Mr Kikukawa meeting on the subject, as I need the answers so I can carefully consider these objectively before deciding on what action on my part is appropriate.

Woodford also reiterated his request that copies of the letters he had sent to Mori and the Board be distributed to the Company's outside auditor and the Company's outside directors and corporate auditors. Woodford concluded that: "I need to be satisfied that the decisions relating to these acquisitions, made by the directors at the time, complied with their fiduciary duties and were taken wholly in the best interests of our shareholders." Letter from Woodford to Mori,

Sept. 25, 2011, at 4 (Exhibit 19).

134. On September 26, 2011, Woodford received an email from Kikukawa. Woodford explained that if he satisfactorily received the information he was seeking by the close of

52 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 56 of 111

business the following day, he would return to Japan. However, if the information was not

satisfactory, then he would not return. As Woodford explained:

To explain why there would be a reluctance for my return to Tokyo without satisfactory answers to points 1 and 2, it is because preference shares, with a value in excess of a USD600 million, were issued to unnamed recipients in the Cayman Islands. In the context of the Gyms acquisition, it is inexplicable to me why Olympus would make a payment of this magnitude. At the time Olympus made the acquisition of Gyms, it was a medical device manufacturer listed on the UK Stock Exchange, when its share price was at a two year low. As you know, there was considerable criticism as to why Olympus paid approximately USD2 billion for Gyrus which equated to extraordinarily high multiples of around one hundred times annual net income (USD23 million). Whatever, this is not the fundamental issue - what is inexplicable is why you and the Olympus Board at that time would sanction an issue of preference shares with a value of USD600 million to so- called advisors? Mr Kikukawa, what is the difficulty in your answering this simple and straightforward question in a direct and clear manner?

Without a satisfactory explanation for such a disproportionately high consideration given to advisors, which disturbs me greatly, and as the FACTA article alleges that 'J Bridge' was associated with the transaction (as you know 'J Bridge' is a euphemism for organised crime and racketeering), my advisors believe that, until there is clarity, my own personal safety could be at risk in Japan. In these circumstances, and in the absence of satisfactory answers to points 1 and 2, my position of not returning to Japan is wholly reasonable and would be seen as such by any independent observers, institutions or statutory authorities.

Letter from Woodford to Mori, Sept. 26, 2011, at 2 (Exhibit 19). As before, the letter was copied to the same people but also included various Ernst & Young partners in Japan, Europe and the

United States.

135. Shortly after Woodford's fourth letter was delivered, Mori sent Woodford emails,

an attached question and answer schedule, together with supporting documents. While on route to Japan, Woodford reviewed these documents. However, certain unanswered questions remained. On September 27, 2011, Woodford wrote a fifth letter to Mon (again copying the

Board, including Kikukawa and Takayama) requesting that additional documents and

53 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 57 of 111

information be provided to him upon his arrival in Japan the following afternoon. Woodford

detailed a list of documents that he sought and concluded as follows:

In conclusion, I remain extremely concerned in relation to:

1. Why the USD600 million was paid to AXES which, by any reference point, seems totally disproportionate.

2. The commercial rationale for the purchase of Altis, Humalabo and News Chef- in my first review of the data, the valuations suggest they were based entirely on optimistic estimates of future performance and do not critically examine the assumptions made. In essence, the amounts Olympus has paid for these companies again seems extraordinarily high and this is confirmed by the substantial impairment of goodwill so soon after these acquisitions.

Woodford also requested a meeting with Mori and Kikukawa on Thursday (the date after

Woodford was to arrive in Japan) and before the full Board was scheduled to meet on Friday.

The letter was carbon copied to the same people as before and also included various Ernst &

Young partners in Japan, Europe and the United States. Letter from Woodford to Mori, Sept. 27,

2011, at 2 (Exhibit 19).

136. On Thursday, September 29, 2011, Woodford and Kikukawa spoke. Kikukawa told Woodford that he would step down as CEO and promote Woodford to replace him.

Kikukawa further agreed not to go to any weekly management meetings and to allow Woodford to nominate his own board. See Exposure at 49-50.

137. On Friday, September 30, 2011, at the Company's Board meeting, Woodford explained that reviewing all the information would take some time, that he was committed to write to the Board and the Ernst & Young representatives with the outcome of his review and that the only way for Olympus to survive was to come clean about the transaction and promote him to CEO. Also, as Kikukawa and Woodford had discussed the night before, Woodford replaced Kikukawa as Olympus CEO. Accordingly, Woodford was appointed CEO of the

54 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 58 of 111

Company but the announcement of Woodford's promotion to CEO was issued only on the

Company's English language website, not on the Japanese site. See Exposure at 50-52; Letter

from Woodford to Kikukawa, Oct. 11, 2011 at 12 (Exhibit 19).

138. While returning to Europe, Woodford, who had become the Company's President

and CEO, knew that to properly address the matters, he needed to obtain independent advice.

Woodford thus retained the legal and forensic accounting services of PwC to review the transactions and give him an honest assessment. See Exposure at 54-55.

C. Woodford's Sixth Letter

139. On October 11, 2011, Woodford wrote a sixth letter to Kikukawa (copying the

same Board members and Ernst & Young representatives as before) and setting forth the conclusions of his review. Woodford focused his concerns on two main issues: (a) the nearly

$680 million payment to Axes/Axam regarding the Gyrus acquisition; and, (b) the goodwill

impairment of $600 million shortly following the acquisition of a majority stake in Altis,

Humalabo and News Chef. PwC, which had reviewed the matters in question, provided

Woodford with an English and Japanese version of the PwC Report. Woodford included copies of the PwC Report in his October 11 letter. See Letter from Woodford to Kikukawa, Oct. 11,

2011 (Exhibit 19).

140. Based on his own analysis, and the PwC Report, Woodford found the following: little to no due diligence was performed; little to no professional or legal advice was sought; where professional and legal advice was sought and obtained, it was rejected; there was no formal Board approval of some of the deals and instead they were approved directly by

Kikukawa, Mori and Yamada; false financial statements were issued in connection with the

55 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 59 of 111

transactions; Olympus directors breached their fiduciary duties and committed criminal wrongdoing; etc. See Letter from Woodford to Kikukawa, Oct. 11, 2011 (Exhibit 19).

141. In conclusion, Woodford wrote to Kikukawa:

As evidenced by the PwC report in relation to the acquisition of Gyrus, there has been a catalogue of calamitous errors and exceptionally poor judgement which, when taken together with the purchase of Altis, Humalabo and News Chef, has resulted in the shocking destruction of shareholder value of USD 1.3 billion. This has parallels to the recent scandal at UBS where a rogue trader in London lost the bank large sums of money and the senior management resigned in recognition of the lack of adequate controls. In my view, the issues associated with Gyrus and the acquisition of companies with no real value are, in many senses, more disturbing, in that the transactions were carried out by the most senior officers of Olympus and not by a junior member of staff.

Tom [Kikukawa], aside from the poor judgement you acknowledged to me in our meeting on Thursday 29 September in relation to the acquisition of Altis, Humalabo and News Chef, it is truly extraordinary and frankly unbelievable that Olympus, a major Nikkei listed public company, made a series of payments approaching USD 700 million in fees (equivalent to approaching 35% of the purchase price of Gyrus) to a company in the Cayman Islands, whose ultimate ownership is still unknown to us, preventing the auditors from verifying that no related parties were involved. If the facts, both in relation to the absolute amount paid in fees and that we don't know to whom these payments were made, were openly known by all our shareholders in Japan and around the world, it would be profoundly damaging to the company's reputation. As the PwC report highlights, three months after Olympus made the final payment to AXAM of USD 620 million, AXAM Investments Limited was struck off in June 2010 for non-payment of licence fees.

In relation to the Japanese shareholders, as you may know I have had an exchange with Mon-san because I was concerned that the announcement of my appointment as CEO had not yet been published in Japanese on the company website. Mr Mori commented to me on the sensitivities in relation to the banks but, subject to the appropriate legal clearances, please do consult with them and for that matter, all the major shareholders, forwarding them copies of my communications and the PwC report. I have absolutely no sensitivity in meeting with them and discussing the issues involved openly and directly. These institutions obviously have their own responsibilities to their shareholders in that their investments are being managed in a correct and proper manner.

In putting the company first, the honourable way forward would be for you and Mon-san to face the consequences of what has taken place, which is a shameful saga by any stretch of the imagination. It is clear that the current situation is now 56 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 60 of 111

untenable and to move forward positively the necessary course of action is for you both to tender your resignations from the Board. This approach would allow the situation to be managed in a discreet manner and minimise the reputational damage to both Olympus and yourselves. If your resignations are not forthcoming, then there is a principal obligation upon me in respecting my fiduciary duties, to raise, with the appropriate parties, my fundamental concerns in relation to the governance of the company.

Letter from Woodford to Kikukawa, Oct. 11, 2011, at 11-12 (Exhibit 19) (emphasis added).

D. The Problems Woodford and the PwC Report Identify

142. Woodford's October 11 Letter focused on the Gyrus deal and the deals involving

Altis, Humalabo and News Chef. The PwC Report focused on the Gyms deal. Together, they

internally exposed the tip of the Company's fraud to Defendants, the Board and Olympus'

auditors, as follows:

(1) The Gyrus Deal

143. Olympus acquired Gyms, a British medical technology developer, on February 1,

2008, for $2 billion.

144. Prior to purchasing Gyrus, Olympus had retained Axes to serve as a financial

advisor. Axes, which had originally filed corporate formation documents in Delaware and

Connecticut, was incorporated in New York on July 18, 2006. Sagawa represented Axes and

was believed by PwC to reside in the United States having worked for Nomura Securities in

New York. After finishing at Nomura Securities he worked at Drexel Burnham and

PaineWebber before setting up Axes. Sagawa was also a "Director" of and the representative of

Axam, an entity incorporated in the Cayman Islands November 19, 2007, and struck off the

local company registry in June 2010 for non-payment of license fees. Axam, whose business is described as an investment and holding company, became the beneficiary of an assignment under which it became entitled to rights previously held by Axes.

57 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 61 of 111

145. As the PwC Report explained, the Gyrus deal was littered with irregular behavior

and unexplained events, which PwC and Woodford summarized in multiple points.

146. First, the level of due diligence carried out by Olympus regarding Axes, Axam

and Sagawa substantially deviated from the Company's usual process and was essentially non-

existent. An electronic approval system was avoided and, according to PwC, minimal

information could be found to authenticate either Axes or Axam as legitimate investment

advisors.

147. Second, public announcements made by Olympus in connection with the Gyrus

deal referred to Perella Weinberg Partners UK LLP ("Perella") as carrying out the role of

financial advisor to Olympus and made no reference to any financial advisory services provided

to Olympus by Axes or Axam. This was particularly troubling given that Olympus ultimately

paid $687 million for this investment advisory service, but directed payment to an entity other

than the actual investment advisor the Company hired and disclosed to the public.

148. Third, the circumstances and rationale behind the Board agreeing to secretly

retain Axes and increase its completion fee from 1% ($20 million) to 5% ($100 million) were

not explained. Olympus initially engaged Axes via a letter agreement dated June 5, 2006, and

countersigned by Olympus on June 12, 2006 (the "Original FA Agreement"). This agreement was subsequently superseded by a further one dated June 21, 2007 (the "Restated FA

Agreement") at around the same time that Olympus sought to acquire Gyms. The Original FA

Agreement provided that Olympus would pay Axes a success fee equal to 1% of the deal consideration payable in the form of cash and share options. In contrast, the Restated FA

Agreement introduced a sliding fee scale of between 2.5% and 6.25% of the deal consideration, again in the form of cash and share options, but now also including warrants. The formula by

58 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 62 of 111

which the value/number of share options to be issued would be calculated was also changed -

Axes was to receive options equivalent to 9.9%, rather than 4.9%, of the issued share capital of

the acquisition vehicle and a substantial discount was built into the option formula to the benefit

of Axes.

149. PwC found this fee arrangement unusual for several reasons:

(a) For a transaction of this size/nature, a normal fee would be about 1% of the deal consideration. As such, a fee of up to 6.25% of the deal was very high;

(b) Professional advisors are usually not compensated in the form of share options or warrants in the acquired business; and,

(c) An advisor's terms of engagement are not usually amended in favor of the advisor once the advisor has been appointed, particularly given that the scope of work does not appear to materially change.

150. Based on the foregoing, PwC concluded that the abnormally high and unusual fee

structure meant that the Axes had a vested interest in a high transaction value and could be

overly-reliant upon the fees payable such that it might appear to lack independence (i.e., it may

have a potential conflict of interest). According to Woodford, no professional advice was

obtained in relation to the reasonableness of this fee structure or to establish whether this was

competitive in relation to the market rate for such financial advisory services. Indeed,

according to Woodford, the terms the Restated FA Agreement resulted in an investment

advisory payment of $244 million, equivalent to 12% of the purchase price of Gyrus and around ten times the market rate for such services.

151. Fourth, the circumstances whereby the advisors' completion fees were allowed to

increase from $lOOm to $189m (including cash) by virtue of the share option formula in the

59 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 63 of 111

agreement with Axes were suspect. The total fees ultimately paid to Axes/Axam were in excess

of the 5% stipulated by the sliding-scale in the agreement. The first increase in the completion

fee was the result of the share option mechanism in the Restated FA Agreement. According to

PwC it is unclear what checks, if any, were made of the share option formula and what external

advice was sought in relation to the agreement in general and share option mechanism in

particular.

152. Fifth, the involvement of Axam to whom preference shares were subsequently

issued, was suspect, along with the provision allowing the advisors' completion fees to increase

even further. According to PwC, in consideration for the cancellation of the share options held

by Axes, Olympus issued preference shares to Axam. The $189 million fee (including cash),

calculated as a result of the share option formula, was thus increased to $682 million as result of

the conversion of the share options into preference shares (with a coupon linked to the profit of

Gyrus) and the settlement of warrants for $50 million. Indeed, on September 30, 2008,

Olympus, Gyrus, Axes and Axam all entered into an agreement (the "Subscription

Agreement"), whereby 176,981,106 preference shares of $1 each in Gyrus (the so called

preference shares) were given to Axam. In addition, Olympus agreed to pay Axam $50 million

for the release of its obligation to issue warrants pursuant to the Restated FA Agreement.

(a) Preference Shares. Olympus received professional and legal advice from

KPMG and Weil, Gotshal & Manges with regard to the issuance of the preference shares, both of whom favored making a cash payment rather than issue preference shares as requested by

Axes/Axam. However, Olympus rejected this professional advice and issued the preference shares instead of cash. Moreover, Olympus took no professional advice in relation to the calculation of the value of the preference shares and the annual rate of return applied to those Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 64 of 111

shares. The preference shares provided for a dividend for each financial year (with priority over any other dividend payment) equal to 85% of the net profit of Gyrus. As such, the Company was liable under the terms of Restated FA Agreement of payout of roughly $180 million.

(b) Warrants. The Restated FA Agreement did not specify the issue price of the warrants. Instead, it provided for a price that Olympus and Axes would later agree upon, simply requiring that the price be calculated by reference to the exercise price of the warrants. In fact, Olympus ascribed no value to the warrants for the financial period ended March 31, 2008.

However, Olympus paid Axam $50 million on September 30, 2008, in settlement of its obligation to issue the warrants pursuant to the Restated FA Agreement. PwC was not aware of any advice Olympus sought or obtained in relation to this payment amount.

153. Sixth, the entry of a further supplement agreement made no rational sense. On

October 3, 2008 - only three days after execution of the Subscription Agreement - a letter

agreement supplemental to the Subscription Agreement was entered into between Axam,

Olympus and Gyrus (the "Supplemental Agreement"). Pursuant to the Supplemental

Agreement, Olympus and Gyrus undertook to refrain from carrying out certain actions without the prior written consent of Axam. These restrictions included: (a) any material change in the nature or scope of the Gyrus business; (b) the disposal of any Gyrus asset other than on commercial terms in the ordinary course of business; and (c) the entering into or variation of any transaction between Gyrus and any member of the Olympus group.

154. PwC did not know why Olympus agreed to accept such restrictions, particularly so quickly after Olympus, Gyrus and Axam had agreed and executed the terms of the

Subscription Agreement.

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155. There was no contractual requirement for Olympus to do so pursuant to the

Subscription Agreement and it appears that, without having executed the Supplemental

Agreement, the business of Gyrus could have been conducted more freely which the Board

considered doing at a meeting held on September 26, 2008.

156. Finally, the Supplemental Agreement took the form of a letter agreement from

Axam and it was not clear to PwC whether Olympus obtained any legal advice prior to

executing the Supplemental Agreement.

157. Seventh, the further escalation of the payments made to Axes/Axam made no

sense. Indeed, shortly after issuing the preference shares to Axam, Olympus agreed to buy them

at a value far exceeding what the parties' initially ascribed to them. On November 25, 2008,

less than two months after Axam received the preference shares, Axam requested that Olympus

purchase the preference shares from it. On November 28, 2008, the Board approved and agreed

to pay Axam $556,977,318 for the preference shares. As a result, between the date of issuance

of the preference shares on September 30, 2008, and the Company's agreement to buy them

from Axam on November 28, 2008, the preference shares had increased from $176 million to

$556 million, or 215%. On March 22, 2010, it was resolved that Olympus Finance UK Limited

("OFUK") would buy the preference shares from Axam for $620 million, which was done on

March 31, 2010. In total, Olympus paid Axes/Axam $687 million, 36.1% of the value of the

entire Gyrus deal. According to PwC, Olympus made the following series of payments to

Axes/Axam:

62

Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 66 of 111

Date Amount Contents Payer Recipient 6/16/06 $3 million Basic Fee Olympus Axes 6/18/07 $2 million Basic Fee Olympus Axes 11/26/07 $12 million Completion Fee Olympus Axes (Cash Compensation) 9/30/08 $50 million Completion Fee Olympus Axam (Warrants) 3/31/10 $620 million Completion Fee Olympus Finance Axam (Preferred shares) UK Ltd TOTAL $687 million

158. Eighth, the accuracy of the valuations performed was suspect. During the course

of Olympus' acquisition of Gyrus, advice was purportedly sought from external advisors in

relation to the valuation of both Gyrus and, later, the share options and preference shares held

by Axam. For example, Shinko Securities Co., prepared a report dated November 26, 2008 in

relation to the valuation of the preference shares held by Axam. The offer price for Gyrus was

significantly above its share price at the time. According to PwC, a 58% premium was paid by

Olympus and as a result, on the announcement of the deal, the share price increased by about

50%. The financial market appeared surprised by the price offered. PwC was unable to

determine what was provided/requested by Olympus to satisfy the Company and Board of the

appropriateness of the purchase price or what discussions took place in respect of the proposed

offer price.

(2) Altis, Humalabo and News Chef

159. Woodford's October 11 letter also addressed the Company's purchase of the three

domestic companies - Altis, Humalabo and News Chef. Among other problems, the companies

had little if any relation to Olympus' core business and little if any record with which to

measure their value.

M. Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 67 of 111

160. According to Woodford, between May 2006 and April 2008, Olympus acquired

the majority controlling interest in the three domestic companies, paying roughly $773 million

for them, and acquiring them from certain entities, including: Dynamic Dragons II SPC, Neo

Strategic Venture, Tensho Limited, Global Target SPC, New Investments Limited, and Class

Fund IT Venture.

161. Shortly after acquiring the three domestic companies, however, as part of the

year-end closing for the year ending March 31, 2009, Olympus wrote down its investment in the

three companies by a total of 76% or $586 million. Below is a chart listing the three companies

and the amounts paid for them and subsequently amortized.

Company Purchase Date Purchase Price March 31, 2009 % of value Impairment Amortized Altis May 06— April 08 V28,812 million V19,614 million 68% Humalabo Sept 07— April 08 V23,199 million V18,370 million 79% News Chef May 06 - April 08 Y21,408 million J17,699 million 83% TOTAL Y73,419 million V55,683 million 76% $773 million $586 million

162. Woodford questioned the basis for acquiring the three domestic companies, the prices paid for them, the entities from whom they were acquired, the manner in which they were acquired, and why so soon after they were acquired the majority of their value was written off.

X. DEFENDANTS DENY ANY WRONGDOING

163. By October 11, 2011, substantial and alarming wrongdoing had been aired internally and pressed by Woodford, the Company's President and CEO. This should have compelled Defendants to take swift and ameliorative action. Instead, Kikukawa got the Board to fire Woodford and began a campaign to disparage him, deny any wrongdoing, and convince the public that nothing improper had been committed. See Exposure at 66-67.

64 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 68 of 111

164. On October 14, 2011, just three days after Woodford presented his sixth letter and

the PwC Report, the Olympus Board met. Kikukawa took the podium and read a prepared

statement:

Today's board meeting to discuss concerns relating to M&A activity is canceled.... There is instead to be a new agenda: firstly the dismissal of Mr Woodford as president, CEO and representative director.

Exposure at 66.

165. The Board, with Woodford prohibited from speaking or voting, unanimously

approved Woodford's termination. Woodford was not allowed to comment. See Exposure at

67. A second motion was put forward to strip Woodford of his officerships of Olympus

America and Europe, which was also unanimously approved. See id.

166. Later that day, Olympus issued a statement regarding Woodford's dismissal.

According to the statement:

Michael C. Woodford has largely diverted from the rest of the management team in regard to the management direction and method, and it is now causing problems for decision making by the management team.

Hence, judging that realisation of the 2010 Corporate Strategic Plan with its slogan of "Advancing to the Next Stage of Globalisation" would be difficult to achieve by the management team led by Woodford, all the board directors attending today, except for Woodford himself who could not participate in the voting due to special interest, unanimously resolved the dismissal from his office of the representative director, President and Chief Executive Officer (dismissal from the office of the representative director, President and Chief Executive Officer and stays as director without executing right.) Along with this, it was also resolved that the representative director, Chairman Tsuyoshi Kikukawa double as the representative director, President and Chief Executive Officer.

Global management that Olympus aims is to implement management rules, information management and operation that are common throughout the world in order to establish a business infrastructure that is more efficient and quick to respond while making the most of a Japanese style management that sets a high value on people, technology and pride of monozukuri or manufacturing. To this end, all our employees will head for the same direction as we will urgently start

65 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 69 of 111

establishing a new structure to go towards the same goal with the entire staff as one.

Olympus Oct. 14, 2011, press release.

167. On October 15, 2011, Kikukawa was interviewed by Japan's Nikkei newspaper, in

which he acknowledged the acquisitions but flatly denied any wrongdoing. He also admitted

paying advisors about V30billion ($390 million). Kikukawa admitted that the firms that were

bought were unprofitable but that they were "necessary to help foster new business." Exposure

at 119-120. According to Woodford, Kikukawa "deliberately misstated the level of so called

payments to advisors." Exposure at 143.

168. Less than a week later, on October 19, 2011, the Company issued a second press

release concerning Woodford's termination, noting that the reason for his departure was that

.major differences had arisen between Mr. Woodford and other management regarding the direction and conduct of the company's business and this had become an impediment to management decision making.

The Company also described Woodford's retention of an external agency to review and report on the matters in question. Despite having had the PwC Report for only a few days, the Company nevertheless noted that it "contains a large amount of material that is based on supposition and speculation and the company believes its content is at variance with the facts and open to misinterpretation." Olympus Oct. 19, 2011, press release at 1. In addition, the Company noted

Woodford's call for the certain senior management to resign and described it simply as "another example of the numerous arbitrary actions taken by Mr. Woodford." The Company regretted the disruption Mr. Woodford caused and noted that Olympus would "consider taking legal action against him." Id.

169. Finally, the Company's October 19 press release listed the major terms of the

Gyrus deal, along with the acquisitions and impairments of the three domestic companies, and Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 70 of 111

emphasized their propriety, including the payment of $687 to a "financial advisor." Indeed,

according to a New York Times article issued on October 18, 2011, entitled "Olympus Defends

Fees Paid to Advisers," the fees were, according to Olympus, not excessive and followed

"appropriate" accounting procedures. The fee on the Gyms deal, however, was the largest

advisory fee in global business history, tripling the previous record of $217 million for the €70

billion takeover in 2007 of the Dutch bank ABN AMRO by the Royal Bank of Scotland. See

Nathan Layne and Michael Flaherty, "Olympus' $687 million advisory Fee Sets M&A Record,"

Reuters (Oct. 22, 2011).

170. On October 21, 2011, the Company issued a press release stating that it was

"setting up an independent committee consisting of experts including lawyers and accountants."

171. On October 26, 2011, the Company issued a press release announcing that

Kikukawa resigned as Chairman and President of the Company. Takayama replaced him as

President and Chairman.

172. On October 27, 2011, at a news conference in Tokyo, Takayama continued to

defend the sums paid to Axes and Axam, saying that Olympus had determined that the fee

"would fully pay off." He said the advisers were hired to give wide-ranging guidance to

Olympus, including identifying potential takeover targets in the medical field. "Olympus

sought acquisitions as part of a strategy to find new growth areas and reduce our dependency on endoscopes," Takayama said. "These acquisitions were part of that effort." Also at the conference Mori said that Axes and Axam had worked with Olympus in an informal capacity for no fee since around 2004 before being formally hired two years later ahead of the 2008

Gyrus deal. See Ben Protess and Hiroko Tabuchi, "U.S. Inquiry Grows Over Olympus Payout,"

The New York Times, Oct. 27, 2011.

67 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 71 of 111

173. Despite the Company's claims of proper conduct, the FBI had been investigating

the Company since mid October; federal prosecutors in New York City had begun investigating

the Company; and, the SEC started examining Axes. Id. 7

174. Also on that day, October 27, 2011, the Company issued a press release entitled

"Additional Information on our Previous Acquisition Deals," with Takayama's name at the top,

with the purported intention of shedding some additional light on the Gyrus deal, and the

acquisition and impairment of the three domestic companies. According to this press release,

Axes was a "strategic consultant" hired in 2006 to help Olympus select corporate targets and

properly value them. (Olympus now referred to Axes by name as a "strategic consultant," when

on October 19 it referred to it simply as a "financial advisor.") Olympus sought someone who

had a "strong connection in the M&A world" and the ability to coordinate financing for large-

sized acquisition deals. Olympus explained that: "As for the strategic consultant, we have not

disclosed its detail for the purpose of protecting personal information. However, considering

potential impacts on the market from some media reports and speculation, we will disclose the

detail as below."

175. Olympus gave the following false exculpatory statement for its historic payments

to Axes/Axam. According to Takayama's October 27, 2011, press release, the basis for having

paid Axes so much began shortly after Gyms was acquired and the Company changed its

business strategy with respect to Gyrus - "it was discovered that more synergy effects then

previously anticipated could be achieved at an early stage, including ample room for cross-

On or about December 20, 2011, the U.S. Department of Justice, based on an investigation conducted by the FBI, filed criminal charges against Chan Ming Fon in connection with his U.S. activities in furtherance of his conspiracy with Olympus and its employees to commit fraud. See U.S. v. Chan Ming Eon, No. 12-MAG-3307 (S.D.N.Y., Dec. 20, 2012). The allegations, which the defendant largely corroborated, mirror those in the JR. Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 72 of 111

selling particularly in the U.S. market, and certain cost reduction expected by introducing our

management method to Gyrus manufacturing sites." This change in business strategy, the

Company explained, resulted in having to renegotiate with Axes, and then inexplicably with

Axam, resulting in a balloon payment of $620 million in March 2010. According to Olympus:

Given the above, we recognize that there were no facts of illegality or illicitness related to a series of transactions regarding our acquisition of Gyrus. In addition, although our payment was made to Axes and Axam, we are not in a position to be aware of the financial flow after payment in terms of confidentiality of funds etc.

176. The Company's October 27, 2011, press release also addressed the three domestic

companies. The release explained that as part of the Company's ongoing effort to expand into

new businesses a fund was established in 2000 for that purpose. According to the release:

In addition to proprietary research, we explored ways to further increase the pace and expand potential toward achieving new business creation, and in the Board meeting held in January 2000, it was decided, as one of the methodologies, to invest 30 billion yen in a business investment fund (hereinafter, "the Fund").

In that year 2006, the Fund set out to assess whether the Fund should become a priority investor because the three businesses represented an extremely significant value, and they held discussions on the matter. As a result, they proactively considered the goal of successfully creating and operating new businesses, and they reached the conclusion that they would conduct proprietary investigations to determine how to retain equity, additional acquisitions by the Fund and valuation of the business. Subsequently, as a result of the investigations a "Report of Examination Results" was created in March 2006. All of the three new companies were determined to have great potential in the medical and health care industries, and investment was made under the condition that it is within the range of the valuation and our equity should be equal to or less than 40%.

177. According to the October 27, 201, press release, Olympus acquired a 30 to 40% stake in one or all of the three companies in May 2006 and then again between September and

December 2007. Sometime in March and April 2008, however, the Company vastly increased its stakes in each of the three domestic companies. Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 73 of 111

After the termination of this Fund, management rights for the three new companies were acquired and - through prompt decision making, for the purpose of a full scale launch of these businesses - shares were purchased from other shareholders, based on decisions taken at the Board meeting in February 2008. At this point, estimated stock values data based on the business plans of the companies were presented to the Board, and stock valuation reports were obtained from an external third party organization for stock price estimates.

In the acquisitions of the three new companies, establishment of the Fund through acquisition of the shares of the three new companies through the Fund, cancellation of this Fund, the series of acquisitions of 100% ownerships by additional share acquisition thereafter, etc. was determined through continuous discussion between our company, the Fund and the three new companies, in- house examination by the management planning headquarters, evaluation/deliberation/approval of the business plans, business values, etc. in the business investment committee, deliberation in the executive committee, and deliberation/resolution in the Board meeting. Therefore, we implemented the procedure which companies commonly adopt in an acquisition of shares.

As stated above, there is no fact that we did something illegal or unauthorized in the acquisitions of the three new companies. In addition, though we bought shares from third parties, we did not conduct an investigation for the third parties concerned, and were not able to grasp the flow of the funds after that.

178. Finally, with respect to the impairment of the three domestic companies, the

Company's October 27, 2011, press release stated:

In addition to the fact that the business prospect diverged from the assumption we had at the time of the investment (May 2006 and September 2007), the external environment worsened due to Lehman shock, etc. Therefore, we conducted the accounting treatment from a conservative viewpoint.

179. Accordingly, Olympus claimed in part to have significantly reduced the value of the three domestic companies shortly after finishing acquiring them because the "business prospect diverged from the assumptions" that Olympus had about them in May 2006 and

September 2007 - even though Olympus decided and in fact acquired major control of the three domestic companies in 2008. 70 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 74 of 111

180. The October 27, 2011, press release, ended in classic Pac. Man style, with a

warning that Olympus would sue anyone impugning the Company's prior statements:

Various reports have been made based on speculation about our past acquisitions, but we recognize that information we disclose this time is true. We are setting up an independent committee and conduct an examination by external experts from a fair viewpoint from now on. We will consider taking necessary legal actions against any acts or any person of misguiding the market with wrong information with regards to our legitimacy and the facts. (emphasis added).

181. On November 1, 2011, Olympus announced the establishment of the Third Party

Committee.

XI. DEFENDANTS FINALLY REVEAL THE TRUTH

182. On November 7, 2011, the Company finally revealed the truth and disclosed that

money for corporate deals made from 2006 to 2008 had in fact been used to mask heavy losses

on investments incurred since the 1990s. The Company stated that Olympus channeled money

through several investment funds to eliminate prior Company losses. According to the

Company's statement, dated November 8, 2011:

[lit has been discovered that the Company had been engaging in deferring the posting of losses on investment securities, etc. since around the 1990s, and that both the fees paid to advisors and funds used to buy back preferred stock in relation to the Gyrus Group PLC acquisition, as well as the purchase funds for the acquisition of the three domestic new business companies (Altis Co., Ltd, NEWS CHEF, Inc. and Humalabo Co, Ltd.) had been, by means such as going through multiple finds, used in part to resolve unrealized losses on investment securities, etc. by such deferral in the posting of these losses.

183. At a news conference held in connection with the Company's announcement,

Takayama stated that: "It is true that there were inappropriate dealings... . Our previous statements were in error." He said Olympus was still investigating the case and was still unprepared to reveal the scale of past losses. He also said that Mori, an executive vice president, had been fired over his involvement in the cover-up. Yamada, who was also 71 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 75 of 111

implicated, offered his resignation, Takayama said. Takayama reiterated the Company's position that Woodford's departure had to do with his aggressive Western-style management style rather than his inquiries into the acquisitions. See Hiroko Tabuchi, "Olympus Hid

Investing Losses in Big Merger Payouts," The New York Times, Nov. 7, 2011.

184. According to the New York Times, the announcement was a bombshell:

TOKYO - Olympus said Tuesday that more than $1 billion in merger payouts were used to hide years of losses on investments, an acknowledgment that is an abrupt about-face for the company, which had denied any wrongdoing in the wake of a widening scandal.

That revelation alone could make this one of the biggest accounting fraud cases in corporate history. It is also a spectacular turn of events amid a boardroom battle that has pitted Olympus' former British chief executive turned whistle- blower, Michael C. Woodford, against an otherwise all-Japanese company board.

Olympus, which is based here in Tokyo, had categorically denied any wrongdoing over the deals, made from 2006 to 2008. Just last week, the company appointed a panel of outside experts to investigate, a measure Olympus said was aimed at assuaging investor fears.

But in an extraordinary statement issued Tuesday, the company said the panel found that the money for mergers had in fact been used to mask heavy losses on investments racked up since about 1990.

The panel found that Olympus channeled money through several investment funds to "eliminate latent losses," the company said in the statement, without elaborating. The revelations came as a surprise because the panel had not been expected to reach any conclusions for at least several more weeks.

The payouts in question involve $687 million in fees Olympus paid to an obscure financial adviser over its acquisition of the British medical equipment maker Gyrus in 2008. That fee amounted to roughly a third of the $2 billion acquisition price, a fee amount more than 30 times the norm.

The Federal Bureau of Investigation and the Securities and Exchange Commission in the United States are also investigating the Gyms deal, according to people familiar with the matter.

72 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 76 of 111

Olympus also acquired three small companies in Japan for a total of $773 million, only to write down most of their value within the same fiscal year. Those companies - Altis, a medical waste recycling company, Humalabo, a facial cream maker, and News Chef, which makes plastic containers - had little in common with Olympus' main line of business of producing cameras and other electronics. Those businesses had not made money before being acquired, according to the credit ratings agency Tokyo Shoko Research.

At a news conference, the company's new president, Shuichi Takayama, bowed deeply in apology. "It is true that there were inappropriate dealings," he said. "Our previous statements were in error." But he stopped short of acknowledging fraud at the company, and said that no money had flowed out of the company. He said Olympus was still investigating the case and was still unprepared to reveal the scale of past losses.

Mr. Takayama also said that Hisashi Mori, an executive vice president, had been fired over his involvement in the cover-up. Hideo Yamada, who is also implicated, has offered his resignation, he said. He reiterated the company's position that Mr. Woodford's departure had to do with his aggressive Western- style management style rather than his inquiries into the acquisitions. Mr. Takayama said that despite the disclosure, he hoped to keep Olympus' shares listed on the Tokyo Stock Exchange. Its shares were down nearly 30 percent Tuesday afternoon.

Mr. Woodford, who worked at Olympus for 30 years, had begun to look into those payouts after a Japanese financial magazine, Facta, published an exposé on the deals. In September, Mr. Woodford commissioned a report by PricewaterhouseCoopers into the Gyrus deal that raised concern over actions taken by Olympus management, including a lack of due diligence.

Based on the report, Mr. Woodford called for a full investigation in a letter dated Oct. 11. He urged the company's chairman at the time, Tsuyoshi Kikukawa, and other members of the board to resign, accusing them of "calamitous errors and exceptionally poor judgment" and comparing them to rogue traders. But on Oct. 14, the Olympus board unanimously voted to oust Mr. Woodford. He said he was not permitted to speak at the board meeting, and was advised to leave the country immediately.

Mr. Kikukawa resigned in late October. In a statement at the time, he denied wrongdoing. Questions remain over Olympus' links to the obscure investment and advisory companies that facilitated those acquisitions, including an investment fund incorporated in the Cayman Islands, as well as Axes, a company that oversaw those funds from the United States and Japan.

The Global Company, an investment advisory firm based in Tokyo, was closely involved in setting up the three companies as well as facilitating their sale to 73 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 77 of 111

Olympus, according to a New York Times investigation. Executives at those companies have not been available for comment.

Hiroko Tabuchi, "Olympus Hid Investing Losses in Big Merger Payouts," The New York Times,

Nov. 7, 2011.

185. Shortly after the Company's disclosure the Tokyo Stock Exchange announced

that it may move Olympus shares to a watch list for possible delisting. Japanese Prime Minister

Yoshihiko Noda called the scandal regrettable and Financial Services Minister Shozaburo Jimi,

the head of Japan's financial regulator, said the scandal tainted Japan's image and that his

agency is "determined to move quickly." See Yuri Kageyama, "Japan Financial Chief

Confirms Olympus Probe," Associated Press, Nov. 11, 2011.

186. On or about November 14, 2010, the Company posted the following admission on

its webpage:

Olympus Corporation would like to announce that the company discovered, in the process of the investigation being carried out by the Third Party Committee with respect to certain previous acquisition transactions, that it had been engaging in activities such as deferring the posting of losses on investment securities.

The Company would like to take this opportunity to sincerely offer our deepest apologies to its stakeholders including shareholders, customers, trading partners and other relevant parties for all inconvenience caused including a fall in share price.

The Company will, while continuously giving its full support to the Third Party Committee which is carrying out the investigation to establish the truth of the case, exert its utmost effort to increase value as a company that is needed by its employees and society, and to bring reassurance to you as quickly as possible.

The Company shall also promptly disclose any new information which has come to light by announcing it in the timely disclosure network provided by the Tokyo Stock Exchange and on our webpage.

Olympus Corporation would like to ask for your continuous support.

Shuichi Takayama Representative Director, President and CEO Olympus Corporation 74 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 78 of 111

See www.olympus-global.com (homepage) (emphasis added).

187. On December 6, 2011, the Third Party Committee that the Company had

established to investigate the matter, issued its Investigation Report and its summary. The IR,

which described the transactions in additional detail, largely confirmed Woodford's findings

and the broad outlines contained in the PwC Report.

188. The IR revealed a massive "loss disposition scheme" orchestrated by top

management and supported by a corporate culture where the Company itself "tried to prevent

the discovery of fraud." JR at 181. The IR details what it refers to generally as the "Incident"

but, more specifically, as the "loss separation scheme," the "loss settlement scheme," the "loss

disposition scheme," or tobashi a Japanese term used to describe the illegal hiding of losses by

transferring them out of one's own financial statements.

189. The IR quantified the losses and the financial cost to Olympus of conducting the

multi-year cover-up:

With the Loss Separate Scheme firmed up, around 1990 2000, when most of the realized loss owned by Olympus is thought to have been separated, the amount of loss separated was 96 billion yen, and in 2003 it was 117.7 billion yen. Subsequently, through the expansion of loss through failures in new investments in the destination Fund of separated losses, loss on sale of ITX shares, payment of remuneration to collaborators of the scheme operation, generation of continued external outflow of fund management costs etc., the losses expanded. As a result, out of the acquisition amount for the Three Domestic Companies, the acquisition amount of 63.2 billion yen for the warrants and the dividend preferred shares that were paid in connection with the Gyrus acquisition, together with the 71.6 billion yen that flowed to the destination Fund of separated losses, a total of 134.8 billion yen, was applied to the scheme maintenance cost, etc, in addition to the loss of 117.7 billion yen noted above that was subjected to "tobashi" through the loss separation scheme.

IR at 114 (emphasis added).

75 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 79 of 111

190. At an exchange rate of 78 yen to every dollar (November 8, 2011), the loss of

Yl 17.7 billion is the equivalent of just over $1.5 billion, and the Yl34.8 billion cost of

maintaining the scheme is the equivalent of over $1.728 billion. All told, the Company incurred

losses and scheme-related costs of over $3.2 billion.

191. The IR concludes:

Due to the discovery of the fraudulent accounting over many years lead by top management, the credibility of Olympus has been tarnished. The extraordinariness of the misconduct in this case and course leading to its discovery delivered a blow to stakeholders such as the shareholders, good ordinary investors, and business partners, and it is extremely regrettable that it has affected in no small way the trust of many Japanese corporations that are engaged in honest management.

IR at 189. Remarkably, the investigation echoed Woodford's assertions about the Olympus top management and the Board, going so far as to conclude that the fraud was "handled and concealed by the top management." IR at 179 (emphasis added). The report goes on to explain:

The case at issue was carried out in secret, lead by top management such as the President, Vice President, Managing Directors, and select executives that surrounded them. At Olympus, there was no risk management system in place that anticipated such misconduct would be carried out by the top management and executives of the company, and the monitoring function against such did not work. The core of management was corrupted, and the periphery was also contaminated....

IR at 179 (emphasis added).

192. The Company has undertaken at least two other investigations both of which have produced reports. First, on or about January 7, 2012, the Company released a Director Liability

Investigation Committee Report. Second, on or about January 16, 2012, the Company released a Non-Director Management Liability Investigation Committee Investigation Report.

193. On January 10, 2012, the Company announced that it was filing a lawsuit in

Tokyo District Court against 19 current and past Company directors in connection with their 76 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 80 of 111

personal liability in the fraud. Defendants Kikukawa and Takayama were included in the list of

defendants sued by the Company. On January 17, 2012, the Company announced that it was

filing a lawsuit in Tokyo District Court against five current and past corporate auditors in

connection with their personal liability in the fraud.

194. On February 16, 2012, the New York Times reported that Defendant Kikukawa

and six other individuals were arrested for violating Japan's securities laws. Among those

arrested were Mori, the former Olympus executive vice president who was fired after the

scandal broke and Yamada, a former Olympus internal auditor who resigned in the scandal's

wake. Japanese authorities also arrested the two former Nomura bankers - Nakagawa and

Yokoo - who ran GC and assisted Olympus with acquiring the loans from LOT Bank. Also

arrested were Taku Hada and Hiroshi Ono, both of whom served on the board of GC. Mr. Hada

was also listed as a director for the three domestic companies that GC helped Olympus acquire.

Kikukawa and the other arrested individuals face 10 year sentences. See Hiroko Tabuchi,

"Arrests in Olympus Scandal Point to Widening Inquiry Into a Cover-Up," The New York

Times, Feb. 16, 2012.

195. On March 6, 2012, the Company announced that the Securities and Exchange

Surveillance Commission ("SESC") filed a formal complaint with prosecutors of the Tokyo

District Public Prosecutors' Office against the Company for filing false securities reports! On

The SESC, which is charged with protecting investors and ensuring the integrity of Japan's capital markets, is under the authority of the Financial Services Agency ("FSA"), which is itself under the authority of Japan's Prime Minister. Japan's Prime Minister appoints the three members of the SESC. The SESC reports its findings to the FSA and to the Tokyo District Public Prosecutor's Office ("TDPPO"). According to a September 27, 2012, SESC report entitled "Recent Efforts of Japanese SESC for Integrity of the Securities Markets," the SESC concluded that Olympus "materially overstated its consolidated net assets in its disclosure documents" through the loss-separate scheme and the loss-disposition scheme. The SESC stated that it conducted an "investigation with the Tokyo Prosecutors Office and the Tokyo 77 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 81 of 111

March 7, 2012, the Company announced that the Tokyo District Public Prosecutors' Office was

in fact prosecuting the Company on the facts described in the formal complaint. The Company,

Kikukawa and others were charged with inflating the Company's net worth through years of

false financial statements. According to the Company's Annual Report for 2012:

• . . as a result of inappropriate financial reporting by the Company, cases under public prosecution for violation of the Securities and Exchange Law and the Financial Instruments and Exchange Act against the Company are currently pending in the Tokyo District Court.

Olympus 2012 Annual Report at 96. The Company further described the action against it as follows:

A case is pending in Tokyo District Court in which the Company is charged with violations of the Securities and Exchange Act and the Financial Instruments and Exchange Act with respect to the Company's deferring of the posting of losses on investment securities, etc., since around the 1990s and the use, via multiple funds, of both the fees paid to financial advisors and funds to buy back preferred stock in relation to the acquisition of Gyms Group PLC as well as the funds for the acquisition of three domestic companies (Altis Co., Ltd, NEWS CHEF, Inc. and Humalabo Co., Ltd.) to resolve unrealized losses on investment securities, etc., by deferring the posting of these losses.

Olympus 2012 Annual Report at 65.

196. On April 27, 2012, the Company announced that it was dissolving Altis,

Humalabo and News Chef.

197. On September 25, 2012, on the first day of trial in the Japanese government's action against Olympus and its top officers, Defendant Kikukawa appeared in Court and personally plead guilty to the criminal charges filed against him. Also, new Olympus President,

Metropolitan Police Department on the false statements from March 2007 to March 2011 and filed criminal complaints against Olympus, its former executives, and external cooperators with prosecutors." In addition to cooperating with domestic authorities, the SESC identified the fund flow of Olympus spanning 10 years, based on the information provided by overseas regulators and in April 2012, made a recommendation for penalties to be assessed against Olympus in the amount of191 (about $2.5 million) for the false financial reports from March 2007 to June 2011. 78 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 82 of 111

Hiroyuki Sasa, appeared in Court and submitted the Company's guilty plea. Mori and Yamada also pleaded guilty. Defendants Kikukawa and Olympus await sentencing.

XII. LOSS CAUSATION ALLEGATIONS

198. The Defendants' fraudulent statements and omissions artificially inflated

Olympus' stock price during the Class Period, until the truth was finally revealed. When

Defendants finally admitted they and the Company had willfully falsified the Company's financials in an effort to mask substantial losses, the value of its stock fell by over 30% in a single day.

199. The Company's ADRs trade in the U.S. in the OTC market under the symbol

"OCPNY." In early October, OCPNY had been trading at over $30 per share. On October 13,

2011, the day before the Company announced Woodford's termination, OCPNY closed at

$32.10. By the close of business on October 14, 2011, following the announcement of

Woodford's termination, the stock closed at $26.15, representing a single day loss of $5.95 or

18.5%. On October 17, 2011 - the following trading day - the stock again fell, closing at

$19.88, representing a single day loss of $6.27 or 23.9%.

200. Takayama and Olympus, however, maintained the stock price by continuing to conceal the fraudulent scheme and by affirmatively making false statements detailed above in the October 27, 2011, press conference and press release.

201. Between the time the Company announced Woodford's termination until it revealed the fraud, OCPNY continued to fall from a closing price of $32.10, on October 13,

2011, to a closing price of $13.72, on November 7, 2011, representing a loss of roughly $18.38 or 57%. Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 83 of 111

202. On November 8, 2011, following the Company's admissions, the price of

OCPNY fell again, closing at $9.05 and representing a single day loss of $4.67 or just over

34%. By November 10, 2011, the stock dropped further to less than $6 per share.

203. Below is a stock chart for OCPNY, representing its daily closing price, change in

value, as well as the daily change as a percentage of the preceding day's closing price:

Date Closing ($) Change ($) Change (%) 10/13/2011 32.10 0.40 1.26% 10/14/2011 26.15 -5.95 -18.54% 10/17/2011 19.88 -6.27 -23.98% 10/18/2011 18.80 -1.08 -5.43% 10/19/2011 18.10 -0.70 -3.72% 10/20/2011 16.85 -1.25 -6.91% 10/21/2011 17.00 0.15 0.89% 10/24/2011 14.50 -2.50 -14.71% 10/25/2011 15.87 1.37 9.45% 10/26/2011 15.00 -0.87 -5.48% 10/27/2011 17.20 2.20 14.67% 10/28/2011 16.40 -0.80 -4.65% 10/31/2011 15.61 -0.79 -4.82% 11/1/2011 15.30 -0.31 -1.99% 11/2/2011 15.48 0.18 1.18% 11/3/2011 15.60 0.12 0.78% 11/4/2011 14.90 -0.70 -4.49% 11/7/2011 13.72 -1.18 -7.92% 11/8/2011 9.05 -4.67 -34.04% 11/9/2011 7.05 -2.00 -22.10% 11/10/2011 5.95 -1.10 -15.60%

204. From October 13, 2011 (before Woodford's termination), until November 8, 2011

(following the Company's admissions), OCPNY fell a total of $23.08, representing a total loss of roughly 71.8% of its total value.

205. As detailed herein, the precipitous decline in the price of Olympus ADRs was a direct result of the nature and extent of Defendants' fraud finally being revealed to investors and

80 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 84 of 111

the market. The timing and magnitude of the decline in the price of Olympus ADRs negates

any inference that the loss suffered by Plaintiffs and the other Class members was caused by

changed market conditions, macroeconomic or industry factors or Company-specific facts

unrelated to the Defendants' fraudulent conduct. The economic loss (i.e., damages) suffered by

Plaintiffs and other Class members was a direct result of Defendants' fraudulent scheme to

artificially inflate Olympus securities and the subsequent significant decline in the value of such

securities when Defendants' prior misrepresentations and other fraudulent conduct were finally

and fully revealed.

XIII. THE FEDERAL SECURITIES LAWS APPLY

206. During the Class Period, Olympus ADRs traded in the United States on the OTC market under the "OCPNY" symbol. Plaintiffs and other Class members purchased Olympus

ADRs in the United States, took title to them in the United States, or became irrevocable liable for their purchase or cost in the United States. As detailed below, Olympus availed itself of the

U.S. securities markets to sell its ADRs here in the U.S.

207. ADRs represent an interest in a foreign company. That interest is evidenced by a certificate issued by a depositary bank. An ADR certificate represents a certain number of ordinary shares of a foreign company. Olympus ADRs, for example, are in a one-to-one ratio with Olympus ordinary shares. ADRs are quoted, sold, and pay dividends in U.S. dollars.

According to the Third Circuit: "ADRs are tradeable in the same manner as any other registered

American security, may be listed on any of the major exchanges in the United States or traded over the counter, and are subject to the Securities Act and the Exchange Act." Pinker v. Roche

Holdings Ltd., 292 F.3d 361, 367 (3d Cir. 2002).

81 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 85 of 111

208. According to the SEC: "When you buy and sell ADRs you are trading in the U.S.

market." Office of Investor Educ. & Advocacy, U.S. SEC, International Investing (2007)

(available at http://www.sec.gov/investor/pubs/ininvest.htm).

209. The Complaint filed in U.S. v. Chan Ming Fon, No. 12-MAG-3307 (S.D.N.Y.,

Dec. 20. 2012), which charges the defendant with conspiring to commit wire fraud with

Olympus as part of the fraudulent tobashi alleged herein, states that:

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.

Chan Ming Fon Complaint, 1 (emphasis added).

210. Co-Lead Counsel spoke with Woodford who explained as follows:

(a) "I went on investor road shows in the U.S.; Olympus looked to sell around the world." See also Exposure at 23 ("I have just returned from our Investor Relations Road

Show and, in the process, have been to New York, Boston, Paris and London, meeting with our overseas investors and potential new ones.")

(b) Road shows in the U.S. "had been a tradition for many years" for

Olympus.

(c) "I was accompanied [on these U.S. road shows] by Nomura Securities and with investor relations people. We met with leading financial institutions, like state pension funds and the like. They would only get materials available in the public domain regarding financial data, not confidential information. The timing corresponded with the filing of public information."

82 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 86 of 111

(d) "I knew about the ADRs when I went to see the FBI, and because of the

ADRs the SEC sat in on the second meeting with the FBI." Woodford said that he knew that

Olympus ADRs traded in the U.S. "I knew there was an ADR listing in the U.S. The ADRs gain the Americans jurisdiction."

A. ADRs in General

211. ADRs are sold in the United States under two types of programs: sponsored and

unsponsored. With a sponsored ADR program, the foreign company itself establishes the sale of

the ADRs in this country with the help of a U.S. depositary bank. An unsponsored ADR

program is one established by a depositary bank without the foreign company's participation or

consent.

212. In a sponsored ADR program, the foreign company whose ordinary shares

underlie the ADRs is a party to an agreement governing the arrangement with the depositary

bank. The foreign issuer is thus able to exercise control over the terms and conditions of the

ADR program, including how many ADRs are registered for trading and what rights the holders

of those ADRs are granted. The depositary bank will generally arrange for holders to exercise

voting rights and to receive shareholder communications.

213. Sponsored ADRs are issued by a single depositary bank and cannot be duplicated

by another depositary bank. Sponsored ADR programs also permit the issuer to know the

number of ADRs that are outstanding and who is holding them - valuable facts to a company's

investor relations department. Foreign companies often receive such information in periodic

reports from their U.S. depositary banks.

83 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 87 of 111

214. ADR sponsored programs are broken down under the federal securities regulations by levels: Level 1, Level 2, and Level 3. Throughout the Class Period, Olympus

ADRs were issued and maintained pursuant to a sponsored Level 1 program.

215. In a Level 1 program, the foreign company designates a depositary bank that also acts as its transfer agent. A Level 1 issuer has minimal reporting requirements, but must have a security listed on one or more stock exchanges in a foreign jurisdiction and must publish in

English its annual reports in the form required by the laws of the country of incorporation, organization or domicile. Under an exception in the Exchange Act, a foreign company in a

Level 1 ADR program is not subject to the same reporting requirements as publicly traded U.S. companies. (17 CFR 240.12G3-2). Nevertheless, the depositary bank must register the ADRs on

SEC Form F-6 to comply with the Securities Act of 1933. As a result of sponsoring the ADR program, the company and its upper management must also sign the registration statement.

Level 2 and Level 3 ADR programs involve greater filing requirements and oversight by the

SEC.

B. Olympus ADRs

216. Olympus ADRs are issued in the U.S. by The Bank of New York, 101 Barclay

Street, New York, NY 10286, the depositary and transfer agent for Olympus.

84 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 88 of 111

217. The Bank of New York issued the Olympus ADRs in the United States under a

Deposit Agreement between Olympus and Bank of New York dated June 17, 1993. The

Deposit Agreement is subject to the laws of the State of New York. The Deposit Agreement

was originally entered into by Olympus Optical Co., Ltd. When the Company changed its name

to its current form, the Bank of New York filed a Form 424133 letter, dated November 6, 2003,

with the SEC, together with and a revised Exhibit A to Deposit Agreement, reflecting the name

change.

218. Olympus ADRs trade in the United States in the OTC securities market under the

symbol "OCPNY." The CUSIP number for Olympus ADRs is 68163W109. CUSIP stands for

Committee on Uniform Securities Identification Procedures. A CUSIP number identifies most

securities and facilitates the clearing and settlement of securities. See CUSIP Number, available at http://www.sec.gov/answers/cusip.htm . Throughout the Class Period, market makers located

in the United States supported and created the trading market in Olympus ADRs. A market maker is a broker-dealer that holds itself out as continuously ready and willing to both buy and sell a particular security.

219. The OTC securities market is an inter-dealer market based in the United States through which trades of securities are negotiated and conducted between brokers. The OTC market depends on the market makers to provide a ready supply of OTC listed securities for sale. One of a security's market makers will generally be on the sell side of any transaction in the security. OTC stocks generally trade on one of two systems: the Over-the-Counter Bulletin

Board (OTCBB) and/or on the Pink Sheets. Olympus ADRs were traded in the OTC Pink

Sheets.

85 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 89 of 111

220. The OTC Bulletin Board ("OTCBB") is an interdealer electronic quotation system

that displays real-time quotes, last-sale prices, and volume information for many OTC securities

that are not listed on the NASDAQ. Broker-dealers who subscribe to the system can use the

OTCBB to look up prices or enter quotes for OTC securities. The principal owner, operator and

regulator of the OTC market is the Financial Industry Regulatory Authority ("FINRA") which

has its principal offices in New York, New York and Washington, DC. The computer servers on

which the OTCBB operates are located in the United States.

221. The Pink Sheets - named for the color of paper on which they had historically

been printed - is operated by OTC Markets Group, Inc., formerly known as Pink OTC Markets

Inc. and the National Quotation Bureau. Market makers - brokers who commit to buying and

selling the securities of OTC issuers - can use the Pink Sheets to publish bid and ask prices.

OTC Markets Group, Inc. is located in Manhattan.

222. During the Class Period, according to financial information obtained from

Bloomberg Financial, the following were the market makers that bought and sold Olympus

sponsored ADRs and thereby made a market for the security in the United States. All of the

market makers have their primary offices in the United States. The market makers 9, and their

primary offices, are as follows:

(a) Archipelago Trading Services, Inc. (ARCA), 100 S. Wacker Drive, 18th

Floor, Chicago, IL 60606;

(b) Automated Trading Desk Financial (AUTO), 11 eWall Street, Mt.

Pleasant, SC 29464;

The four-character parenthetical beside each market maker name is each such firm's Market Participant identifier - a four character alpha code used to report trades - and is required by FINRA. (http://www.finra.org/Industry/Compliance/Market Transparency/INSITE/FAQIP0056 11). 86 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 90 of 111

(c) Buckman, Buckman & Reid, Inc. (BKRT), 174 Patterson Avenue,

Shrewsbury, NJ 07702;

(d) Cantor Fitzgerald & Co. (CANT), 6 Thorndal Circle, Darien, CT 06820;

(e) Citadel Securities LLC (CDRG), 131 South Dearborn Street, Chicago, IL

60603;

(f) Citigroup Global Markets Inc. (SBSH), 388 Greenwich Street, NY, NY,

10013;

(g) Collins Stewart Inc. (STEW), 350 Madison Avenue, New York, NY

10017;

(h) Domestic Securities (DOMS), 160 Summit Avenue #1, Montale, NJ

07645;

(i) E*Trade Capital Markets LLC (ETRF), 440 South LaSalle Street,

Chicago, IL;

(j) Empire Financial Group Inc. (EFGI), 2170 West State Road, Suite 100,

Longwood, FL 32779;

(k) Gunn Allen Financial Inc. (GNLN), 5002 West Waters Avenue, Tampa,

FL (closed operations in March 2010);

(I) Finance 500, Inc. (FANC), 19762 MacArthur Blvd, Suite 200, Irvine, CA

92612;

(m) Hill Thompson Magid & Co. (HILL), 15 Exchange Place, Suite 800,

Jersey City, NJ 07302;

(n) Hudson Securities, Inc. (HDSN), 525 Washington Boulevard, Jersey City,

NJ 07310;

87 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 91 of 111

(0) International Trading, Inc. (INTL), 708 Third Avenue, 7 th Floor, New

York, NY 10017;

(p) Israel A. Englander & Co. (IAEX), 666 Fifth Avenue, New York, NY

10103;

(q) Jane Street Markets, LLC (JANE), One New York Plaza, 33 rd Floor, New

York, NY 10004;

(r) Jeffries & Company, Inc. (JEFF), 13355 Noel Road #1400, Dallas, TX

75240;

(s) Knight Equity Markets, LP (NITE), Newport Tower, 545 Washington

Boulevard, 30th Floor, Jersey City, NJ 07310;

(t) Labranche Capital, LLC (LABS), 33 Whitehall Street, New York, NY

10004;

(u) Lighthouse Financial Group LLC (LFCM), 106 W. 20th Street,

Connersville, IN 47331;

(v) Maxim Group LLC (MAXM), 405 Lexington Avenue, 2 nd Floor, New

York, NY 10174;

(w) Mercator Associates (MERQ), 708 Third Avenue, 6th Floor, New York,

New York 10017;

(x) Merrill Lynch, Pierce, Fenner & Smith (MLCO), One Bryant Park, 6th

Floor, New York, NY 10036;

(y) Murphy & Durieu (MURF), 2810 East Oakland Park Boulevard, Fort

Lauderdale, FL 33306;

88 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 92 of 111

(z) NATIXIS Securities Americas LLC (ABLE), 1251 Avenue of the

Americas, New York, NY 10020;

(aa) Pershing LLC (PERT), One Pershing Plaza, Jersey City, NJ 07399;

(bb) Puma Capital LLC (PUMA), 488 Madison Avenue, Suite 1706, New

York, NY 10022;

(cc) Rodman & Renshaw, LLC (HDSN), 1251 Avenue of the Americas, New

York, NY 10020 (operations now closed);

(dd) Stockcross Financial Services, Inc. (STXG), 15 Exchange Place, Suite

615, Jersey City, NJ 07302;

(ee) The Vertical Group, Inc. (VERT), 415 Fifth Avenue, 6th Floor, New York,

NY 10016;

(ff) Ticonderoga Securities LLC (FORT), 520 Madison Avenue, 4th Floor,

New York, NY 10022 (closed operations January 2012);

(gg) Tullett Liberty Securities (TLIB), 108 Corporate Park Drive, White Plains,

NY 10604;

(hh) UBS Securities LLC (UBSS), 677 Washington Boulevard, 6th Floor,

Stamford, CT 0690 1-0305;

(ii) Vandam Securities Corp. (VNDM), 50 Tice Boulevard, Woodcliff Lake,

NJ 07677;

(jj) vFinance Investments (VFIN), 63 Main Street, Suite 201, Fleming, NJ

08822;

(kk) Weedon & Co. L.P. (WEED), 145 Mason Street, Greenwich, CT 06830. Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 93 of 111

C. Plaintiffs Took Title To Their Olympus ADRs in the United States

223. Plaintiffs' Class Period purchases of Olympus ADRs were initiated, executed and

finalized in the United States.

224. Lead Plaintiff Kadiyala resides in the United States. Lead Plaintiff placed his

order to purchase Olympus ADRs by telephoning his financial advisor in Baltimore, Maryland.

Lead Plaintiffs financial advisor maintains its only office in Baltimore and is a licensed

representative of Securities America, Inc. ("SA"), a registered broker dealer incorporated in

Delaware and headquartered in La Vista, Nebraska.

225. Lead Plaintiff's financial advisor executed the purchase of Lead Plaintiffs ADRs.

It did so by placing the order with SA. Lead Plaintiffs account is maintained by National

Financial Services LLC ("NFS"), which provides clearing services for SA. NFS is incorporated

in Delaware and has its principal headquarters in New York, New York. NFS is wholly owned

by Fidelity Global Brokerage Group, Inc. ("Fidelity"), which is a wholly owned subsidiary of

FMR LLC (Fidelity Management and Research) ("FMR"). Fidelity is incorporated in

Massachusetts and headquartered in Boston, Massachusetts. FMR is a Delaware limited liability

company with headquarters in Boston, Massachusetts. Lead Plaintiff funded his brokerage account and his purchase of the Olympus ADRs by sending a check in U.S. dollars made out to

NFS, drawn on his bank in the United States.

226. Once SA received and authenticated Lead Plaintiff's requested purchase of

Olympus ADRs, the order was routed to NFS. NFS then deducted the cost of purchasing the

Olympus ADRs from Lead Plaintiff's account, and credited his account the actual acquired

Olympus ADRs. Lead Plaintiff's purchases of Olympus ADRs are set forth on his certification annexed hereto. Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 94 of 111

227. All orders, commitments to purchase, irrevocable liability to purchase, payments of money, and transfers of title in connection with the purchase of Lead Plaintiff's Olympus

ADRs occurred in the United States.

228. Plaintiff Sharkey resides in the United States. Sharkey purchased Olympus ADRs using brokerage accounts he maintains with TD Ameritrade, Inc. ("TD"). TD is an introducing broker-dealer located in the United States. TD is incorporated in New York and has its principal executive offices in Bellevue, Nebraska. TD Ameritrade Clearing, Inc. ("TD Clearing") provides clearing and execution services to TD. TD Clearing is incorporated in Nebraska and has its principal executive offices in Bellevue, Nebraska. TD and TD Clearing are subsidiaries of TD Ameritrade Holding Corporation ("TD Holding"), a Delaware corporation headquartered in Omaha, Nebraska.

229. According to TD Holding, TD Clearing performs all of the following functions out of its Nebraska office: (a) it maintains client accounts; (b) settles securities transactions with clearinghouses such as The Depository Trust & Clearing Corporation and The Options

Clearing Corporation; (c) settles commissions and transaction fees; (d) prepares client trade confirmations and statements; (e) performs designated cashiering functions, such as delivering securities to the client; (0 maintains, controls and safeguards funds and securities in client accounts; (g) transmits tax accounting information to the client and the applicable tax authority; and (h) forwards prospectuses, proxy materials and other shareholder information to clients.

91 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 95 of 111

230. Plaintiff Sharkey funded his TD Ameritrade accounts by sending a check in U.S.

dollars and wiring funds to TD from his bank account in the United States. Plaintiff Sharkey

placed his orders to buy Olympus ADRs in the United States by logging on to his account

through the TD website and placing his purchase order. TD then deducted the cost of the

Olympus ADRs he had bought online from his TD accounts. TD also credited his brokerage

account with the Olympus ADRs he acquired. Plaintiff Sharkey's purchases of Olympus ADRs

are set forth on his certification annexed hereto.

231. All orders, commitments to purchase, irrevocable liability to purchase, payments

of money, and transfers of title in connection with the purchase of Plaintiff Sharkey's Olympus

ADRs occurred in the United States.

XIV. APPLICABILITY OF THE PRESUMPTION OF RELIANCE: THE FRAUD ON THE MARKET DOCTRINE

232. At all relevant times, the market for Olympus ADRs was an efficient market for

the following reasons, among others:

(a) Olympus ADRs met the requirements for listing, and were listed and actively traded in the United States on the OTC, an efficient market;

(b) As a regulated issuer, Olympus issued periodic financial reports;

(c) Olympus stock was followed by securities analysts employed by major brokerage firms who wrote reports which were distributed to the sales force and certain customers of their respective brokerage firms. Each of these reports was publicly available and entered the public marketplace.

(d) Olympus regularly issued press releases, both in English and Japanese, which were carried by national newswires. Each of these releases was publicly available and entered the public marketplace. 92 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 96 of 111

(e) Olympus has numerous market makers identified above which bought and sold Olympus ADRs, during the Class Period, and made a market for Olympus ADRs.

233. As a result, the market for Olympus securities promptly digested current

information with respect to Olympus from all publicly-available sources and reflected such

information in Olympus' stock price. Under these circumstances, all purchasers of Olympus

ADRs during the Class Period suffered similar injury through their purchase of stock at

artificially inflated prices and a presumption of reliance applies.

XV. NO SAFE HARBOR

234. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.

The specific statements pleaded herein were not identified as "forward-looking statements" when made. Nor was it stated with respect to any of the statements forming the basis of this

Complaint that actual results "could differ materially from those projected." To the extent there were any forward-looking statements, there were no meaningful cautionary statements

identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements. Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking statements pleaded herein, Defendants are liable for those false forward-looking statements because at the time each of those forward-looking statements were made the particular speaker knew that the particular forward-looking statement was false, and/or the forward-looking statement was authorized and/or approved by an executive officer of Olympus who knew that those statements were false when made. Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 97 of 111

XVI. ADDITIONAL SCIENTER ALLEGATIONS

235. As alleged herein, Defendants acted with scienter in that Defendants knew that

the public documents and statements, issued or disseminated by or in the name of the Company

were materially false and misleading; knew or recklessly disregarded that such statements or

documents would be issued or disseminated to the investing public; and knowingly and

substantially participated or acquiesced in the issuance or dissemination of such statements or

documents as primary violators of the federal securities laws. As set forth elsewhere herein in

detail, Defendants, by virtue of their receipt of information reflecting the true facts regarding

Olympus and its business practices, their control over and/or receipt of Olympus' allegedly

materially misleading misstatements, and/or their associations with the Company which made

them privy to confidential proprietary information concerning Olympus were active and

culpable participants in the fraudulent scheme alleged herein. Defendants knew and/or

recklessly disregarded the falsity and misleading nature of the information which they caused to

be disseminated to the investing public. This case does not involve allegations of false forward-

looking statements or projections but instead involves false statements concerning the

Company's business, finances and operations. The ongoing fraudulent scheme described in this

Complaint could not have been perpetrated over a substantial period of time, as has occurred,

without the knowledge and complicity of the personnel at the highest level of the Company,

including the Individual Defendants.

236. Defendant Olympus acted with scienter at all relevant times, as shown by, among other things, the following facts, when considered together and with each other:

94 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 98 of 111

(a) Olympus fully admitted the fraudulent loss separation scheme and the loss disposition scheme - separating out its investment losses and settling them so they were hidden on its financial statements;

(b) Olympus sued its former top executives for devising and carrying out the loss disposition scheme, including but not limited to, Kikukawa, Mori, Yamada, Yokoo, and

Takayama, in a civil action in Tokyo, conceding the wrongdoing of its top management, which wrongdoing and knowledge may be imputed to Olympus;

(c) Olympus was indicted by Japanese authorities for fraudulently publishing false financial statements stemming from the tobashi alleged herein and pleaded guilty (along with its senior management) of engaging in fraudulent transactions to hide substantial Company losses for over a decade;

(d) Olympus' top executive managers, Yamada, Mori, Ota, Kikukawa,

Nakatasuka, among others, devised, carried out, and covered up the fraudulent scheme, and knew or were severely reckless in not knowing that Olympus' public financial statements were materially false and misleading for the reasons set forth herein;

(e) Olympus knew, or was severely reckless in not knowing, that it lacked sufficient controls over financial reporting, creating a substantial risk of fraud, but nevertheless did nothing to correct this deficiency for over a decade. See JR at 122-44 (detailing Olympus'

"dysfunctional" governance).

(0 Olympus knew, or was severely reckless in not knowing, that it lacked any

"risk management system" that could "anticipate ... misconduct [of the type that occurred] would be carried out by the top management and executives of the company," and knew or was

95 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 99 of 111

severely reckless in not knowing, that whatever monitoring function it did have against such fraud, "did not work." See JR at 179.

(g) Olympus knew, or was severely reckless in not knowing, that its Board was "a mere formality," increasing the risk of fraud, and was essentially only a rubber stamp for whatever the executives brought before it for approval, including the purchase of Altis,

Humalabo, and News Chef, and the payment of the extraordinarily large fees to Olympus' financial advisors on the Gyms acquisition. See IR at 180.

(h) Olympus knew, or was severely reckless in not knowing, that its management was not accountable, and operated in a system in which failure to investigate losses in assets "was not considered to be a problem," see JR at 180, thus increasing the risk of fraud.

(i) Olympus knew, or was severely reckless in not knowing, that it "did not reveal the full particulars of the [purchase of the three companies (Altis, Humalabo, and News

Chef) and the Gyrus investment advisory fees] in its securities reports, ... [nor did it] ma[k]e requisite and sufficient disclosure for investors to make investment decisions." See JR at 181,

184.

(j) Olympus knew or was severely reckless in not knowing, that its deficiencies in accounting, internal control, management accountability, and lack of adequate financial disclosure continued "over many years." See IR at 185.

237. Defendant Kikukawa acted at all times with scienter, as shown by, among other

things, the following facts, when considered together and with each other:

(a) Kikukawa was interviewed extensively by the attorneys who conducted the Third-Party Investigation Report, and "Kikukawa acknowledges that, by January 2000 at the

96 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 100 of 111

latest, he was aware of the facts surrounding the existence and execution of the loss separation scheme described [in the Third-Party Report]." IR at 18, 76.

(b) Kikukawa received periodic written reports on the unrealized losses and the administration of the Funds that included the unrealized losses, and was regularly briefed by

Yamada and Mori about the disposition of the unrealized losses whenever necessary. See IR at

19.

(c) Kikukawa participated in establishing the European route of providing cash to the Funds set up to affect the loss separation scheme. See IR at 22.

(d) Kikukawa was the officer in charge of establishing a "Business Investment

Fund" on January 28, 2000 to affect the transfer of billions of yen to carry out the loss disposition scheme. See IR at 29.

(e) "Several days before the Management Meeting convened on January 28,

2000, the classification of assets by purpose of use and a basic portfolio of financial assets were proposed (the document entitled 'Classification of Liquidity on Hand by Use and Operating

Methods'), but this was in order to undertake investment in financial assets and business investment Funds, in order to allocate the huge amount of funds required for realizing the loss separation and settlement schemes. Kikukawa, who had received a full explanation beforehand from Mori, the drafter, was aware of this." IR at 76.

(1) Kikukawa sought and obtained Board approval to purchase Altis,

Humalabo, and News Chef in 2008, stating to the Board: "would that be all right[?]" - knowing these companies would be used to carry out the loss disposition scheme. IR at 45.

(g) After Olympus purchased the stock of Altis, Humalabo, and News Chef,

"Yamada reported to Kikukawa that the business value of the [these companies] had been

97 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 101 of 111

assessed a rather high amount, whereupon Kikukawa stated 'Let's move ahead based on this',

'We absolutely must do something about [these companies]. I will also cooperate with you', and

'If things go well, the [undisclosed investment losses] will decrease by a large amount, won't it', and thus expressed a stance of actively addressing the resolution of the pending matter on his own." IR at 76.

(h) Kikukawa signed the contract, the revised contract, and the call option agreement, so that Olympus could pay Axes, the financial advisor on the Gyms acquisition, exorbitant fees (approximately $700 million), knowing the acquisition and these huge fees were part of the loss disposition scheme. See JR at 50, 54.

(i) "Concerning the Gyrus purchase, Yamada and Mori had reported to

Kikukawa, the President, point by point in accordance with the progress of the situation. Around

September 2008, when they examined how Olympus could purchase the dividend preferred shares of Gyms for a large amount of money from Axes, which had issued it, Kikukawa asked

Yamada and Mori, 'What do you think? Can it all be eliminated?', and when at the end of their discussion, he spoke his mind by saying 'It will be nice if this were the end.' The fact that

Kikukawa, as the President, was hoping from his heart for the realization of this scheme in order to eliminate the largest dark shadow over Olympus was expressed." IR at 77.

(j) Kikukawa pleaded guilty to inflating the Company's net worth in its financial statements and engaging in fraudulent transactions in order to hide substantial

Company losses;

(k) Kikukawa accordingly knew, or was severely reckless in not knowing, that

Olympus' public financial statements were materially false and misleading as alleged herein.

98 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 102 of 111

238. Defendant Takayama acted at all relevant times with scienter, as shown by the

following facts, when considered together and with each other:

(a) From June 29, 2006 to his departure in November 2011, Takayama was part of the Board of directors that was a "mere formality" and which rubber-stamped the acquisition of Altis, Humalabo, and News Chef, as well as the acquisition of Gyrus and the payment of absurdly-high fees to Axes, Olympus' financial advisor on the deal. See IR at 180,

184; Director Liability Investigation Committee Report, list of Directors).

(b) Takayama received all six of Woodford's letters (annexed hereto) to Mon and Kikukawa, raising serious questions about the Facta articles, the acquisition of Altis,

Humalabo, and News Chef, and the acquisition of Gyrus and the fees paid to Olympus' financial advisor on the Gyrus acquisition, and including a copy of the PwC Report.

(c) Despite receiving Woodford's letters and the PwC Report, which would have made any reasonable person doubt the validity of these transactions, Takayama kept to the

Company line about them, and in a Tokyo press conference on or about October 27, 2011,

Takayama publicly defended the acquisition of the three domestic companies (Altis, Humalabo,

News Chef) and the payment of almost $700 million in advisory fees to unknown parties in the

Cayman Islands. See Exposure at 138-139; Olympus Press Release, October 27, 2011 &

PowerPoint Slide Presentation (available at www.olympus.com ).

(d) At the Tokyo press conference on or about October 27, 2011, Takayama blamed Woodford for Olympus' share price decline and continued to maintain the legitimacy of

Olympus' bogus acquisitions of Altis, Humalabo, and News Chef, despite all of the information to the contrary and the PwC Report: "If this secret information hadn't been leaked there would have been no change in our corporate value,' [Takayama] declared. 'It was our strategy to find

99 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 103 of 111

new growth areas to reduce our over-reliance on the endoscope business. The three acquisitions were part of that strategy." Exposure, at 138.

(e) Takayama received numerous questions from Japanese reporters (for 100 minutes), but failed to clear up basic questions surrounding the acquisition of the three "Mickey

Mouse" companies and the Gyms acquisition and financial advisor fees. See Exposure, at 136-

137.

(f) Takayama stuck to the Company line and repeated all the fraudulent explanations given for the tobashi by his predecessor, even though Takayama (i) had received hard information in the PwC Report; (ii) the Third-Party Committee had begun investigating the suspected transactions; and, (iii) Kikukawa had resigned.

(g) Takayama caused the Company to issue the October 27, 2011, press release and the release bears his name at the top as Representative Director and President. In the release, Takayama gave a false exculpatory statement to investors to explain the fraudulent accounting for the three domestic companies and the Gyrus acquisition.

(h) On November 7, 201 1, just 11 days after telling investors and reporters that acquisitions and financial advisor fees were completely legitimate, Takayama told the public in a press conference the exact opposite - that all of them were fraudulent.

(i) Takayama has been sued civilly by Olympus along with other executives for harms to the Company caused by the tobashi.

(j) Takayama thus knew, or was severely reckless in not knowing, that

Olympus' public financial statements were false and misleading, and his public denials of any wrongdoing had the effect of delaying the revelation of the full truth about the Company's fraud.

100 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 104 of 111

XVII. CAUSES OF ACTION

Count I

Violations of Section 10(b) of The Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants

239. Plaintiffs repeat and reallege each and every allegation contained above.

240. Defendants: (a) knew or recklessly disregarded material adverse non-public information about Olympus' financial results and then existing business conditions, which was not disclosed; and (b) participated in drafting, reviewing and/or approving the misleading statements, releases, reports and other public representations of and about Olympus.

241. During the Class Period, Defendants, with knowledge of or reckless disregard for the truth, disseminated or approved the false statements specified above, which were misleading in that they contained misrepresentations and failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

242. The Company admitted to creating and carrying out this fraud. It has pleaded guilty to falsifying its financial statements. Olympus' core management intentionally carried out a multi-year scheme to hide its liabilities, as detailed above.

243. At all relevant times, the executive management of Olympus, including

Kikukawa, Mori, Yamada, Ota, and others, knew that the public financial statements of

Olympus were false and misleading because they failed to reflect the more the $1 billion in investment losses the Company sustained in the 1980's and 1990's.

244. Kikukawa and these other Olympus executives also knew that the Company had intentionally hidden these losses in the elaborate tobashi scheme alleged above and took steps to

101 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 105 of 111

ensure that the Company's financial statements concealed those losses from investors and

analysts.

245. Olympus, Kikukawa, and the other Olympus executives had the responsibility and

authority to ensure that the Company's financial statements were accurate and not misleading.

Olympus, Kikukawa, and the other Olympus executives had the ultimate authority over the false

financial statements alleged herein, including the content and whether and how to communicate

it.

246. Defendant Takayama confirmed all of the Company's false statements about the

legitimacy of Olympus' purchase of the three domestic companies (Altis, Humalabo, and News

Chef), as well as the false statements about the legitimacy of the Gyrus acquisition and the

advisory fees paid in connection with that deal. Takayama did so with no basis and in the face

of the serious questions raised to him and other Board members by Woodford, including those

in the PwC Report. In doing so, Takayama acted with the intent to defraud, by perpetuating the

fraudulent tobashi scheme, regardless of all the facts presented to him, or acted with severe

recklessness.

247. Takayama had the responsibility and authority to ensure that the Company's

financial statements were accurate and not misleading, at the very least during the period after he began receiving letters from Woodford and assumed the position of Representative Director and President of Olympus.

248. Defendants violated §10(b) of the Exchange Act and Rule lOb-5 promulgated thereunder in that they (a) employed devices, schemes and artifices to defraud; (b) made untrue statements of material facts or omitted to state material facts necessary in order to make statements made, in light of the circumstances under which they were made, not misleading; or

102 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 106 of 111

(c) engaged in acts, practices and a course of business that operated as a fraud or deceit upon the

purchasers of Olympus ADRs during the Class Period.

249. Plaintiffs and the Class have suffered damage in that, in reliance on the integrity

of the market, they paid artificially inflated prices for Olympus stock. Plaintiffs and the Class

would not have purchased Olympus ADRs at the prices they paid, or at all, if they had been

aware that the market prices had been artificially and falsely inflated by Defendants' false and

misleading statements.

Count II

Violation of Section 20(a) of The Exchange Act Against the Individual Defendants

250. Plaintiffs repeat and reallege each and every allegation contained above.

251. The Individual Defendants acted as controlling persons of Olympus within the

meaning of Section 20(a) of the Exchange Act. The Individual Defendants controlled Olympus

as well as top level accounting personnel and other executives at Olympus. Olympus and these

other top level personnel and executives at Olympus were controlled persons and committed a

primary violation of the federal securities laws, namely, securities fraud in violation of Section

10(b) of the Exchange Act and Rule 1 0(b)(5) promulgated thereunder. The Individual

Defendants were culpable participants in this fraud, because they knew or should have known

of the fraud and substantially participated in it, and/or knowingly took no action with respect to the fraud with the intent to further the fraud or prevent its discovery.

252. By reason of such wrongful conduct, the Individual Defendants are liable pursuant to §20(a) of the Exchange Act. As a direct and proximate result of the Individual

Defendants' wrongful conduct, Plaintiffs and the other members of the Class suffered damages in connection with their purchases of Olympus ADRs during the Class Period. 103 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 107 of 111

XVIII. JURY TRIAL DEMANDED

253. Plaintiffs hereby demand a trial by jury.

XIX. PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for relief and judgment, as follows:

A. Determining that this action is a proper class action and certifying Plaintiffs as class representatives under Rule 23 of the Federal Rules of Civil Procedure;

B. Awarding compensatory damages in favor of Plaintiffs and the other Class members against all Defendants, jointly and severally, for all damages sustained as a result of

Defendants' wrongdoing, in an amount to be proven at trial, including interest thereon;

C. Awarding Plaintiffs and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; and

D. Such other and further relief as the Court may deem just and proper.

Dated: January 15, 2013 Z~kl 44eW44 4P Steven Weenfogel Daniel B. Allanoff LITE DEPALMA GREENBERG, LLC 1521 Locust Street, 8th Floor Philadelphia, PA 19102 Tel: (215) 564-5182 Fax: (215) 569-0958

Liaison Counsel for Plaintiffs

VIANALE & VIANALE LLP Kenneth J. Vianale (admitted pro hac vice) 2499 Glades Road, Suite 112 Boca Raton, FL 33431 Tel: (561) 392-4750 Fax: (561) 392-4775

104 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 108 of 111

SARRAF GENTILE LLP Ronen Sarraf (admitted pro hac vice) Joseph Gentile (admitted pro hac vice) 450 Seventh Avenue, Suite 1900 New York, New York 10123 Tel: (212) 868-3610 Fax: (212) 918-7967

Co-Lead Counsellor Plaintiffs

105 Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 109 of 111

AMENDED CERTIFICATION OF PLAINTIFF PURSUANT TO FEDERAL SEJBITIES LAWS

I, Chaitanys Kadiyala, make this declaration pursuant to the federal securities laws.

1. I have reviewed the complaint in this action (the "Complaint") and authorized its filing on my behalf. I have also reviewed the trading records for my account and I hereby amend my prior certification, dated November 11, 2011.

2. I did not purchase the securities of Olympus Corporation (the "Company") at the direction of my counsel in order to participate in any private action arising under the Securities Act of 1933 or the Securities Exchange Act of 1934.

3. I am willing to ser'e as a lead plaintiff either individually or as a group. A lead plaintiff is a representative party who acts on behalf of other class members in directing the action, and whose duties may include testifying at deposition and trial, if necessary.

4. During the three year period preceding the date of my signing this Certification, I have not served nor sought to serve as a representative party on behalf of a class, except (if any):

5. My transactions in Company stock are as follows;

6. Twill not accept any payment for serving as a representative party on behalf of the class beyond the pro rata share of any possible recovery, phis reasonable costs and expenses (including lost wages) directly relating to the representation of the class, as approved by the Court

I declare under penalty of perjury this 13 day of January 2012, that the foregoing is true and correct.

tQ Cha&tanya Kadiyala Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 110 of 111

CERTIFICATION OF PLAINTIFF PURSUANT TO FEDERAL SECURITIES LAWS

I, Kelly Shai*ey, make this declaration pursuant to the federal securities laws.

1. 1 have reviewed Plaintiffs' Second Amended Class Action Complaint in this action (the "Complaint") and authorized its filing on my behalf,

2. I did not purchase the securities of Olympus Corporation (the "Company") at the direction of my counsel in order to participate in any private action arising under the Securities Act of 1933 or the Securities Exchange Act of 1934.

3. 1 am willing to serve as a lead plaintiffeither individually or as a group. A lead plaintiff is a representative party who acts on behalf of other class members in directing the action, and whose duties may include testifying at deposition and trial, if necessary.

4. During the three year period preceding the date of my signing this Certification, I have not served nor sought to serve as a repiesentative party on behalf of a class, except (if any):

S. My transactions in Company stock are reflected in the attached Schedule Ac

6. I will not accept any payment for serving as a representative party on behalf of the class beyond the pro rata share of any possible recovery, plus reasonable costs and expenses (including lost wages) directly relating to the representation of the class, as approved by the Court.

1 declare under penalty of perjury this / q day of 1' M''7 2013, that the foregoing is true and correct.

kpy~-key

Case 5:11-cv-07103-JKG Document 50 Filed 01/15/13 Page 111 of 111

Schedule A

Trade Date Number of Shares Price Per Share Buy or Sell - 10/24/11 1,000 -- - $ 14.99 Buy 10/24/11 1,000 $15.50 Be 10/24/11 1,000 BuV 11/4/11 11000 $15.05 Be - -WOMOO •._. .4.78 .. BUY 11 $13.25 Bu 1,000 $9.25 Sell 11 580 $9.25 . -. Sell 11/9/11 .21000 •.. ., $7.20 . ,.. Sell 11/9/11 -- 11000 $7.12 Sell 11/9/11 -- 100 $715 Sell 11/9/11 •.••• 476 $6.99 . SelL. 11/9111 - 844 $6.99 Sell

11/14/11 2,000 $•:• Buy 11/16/11 -- •. 2,000 $9.74 Buy 11/17/11 - 1,000 $9.28 Buy 11/17111 726 - $9.31 -- BUY- 11/17!11 274 - $9.30 Buy 11/18/11 30O0 $7.02 - ... Sell 11/18/11 - 1 2000 - $7.o3 Sell 11/18/11 2,000 $7.03 .. - Sell