Exclusive: Olympus trail reaches elusive banker's Florida home

Markets Reuters

By Kevin Gray

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The veteran banker, Hajime 'Jim' Sagawa, owned an obscure U.S. financial firm that was hired by the camera and endoscope maker five years ago to provide what later turned out to be stunningly expensive advice, a fee of $687 million, the documents show.

Reuters went to Sagawa's Florida home on Thursday. The ex-Nomura banker's wife, Ellen, said he was traveling and that he had done nothing wrong.

"My husband was on Wall Street for many years and was well-respected," she said after answering the door of their waterside two-story home in Boca Raton, north of Miami.

"My husband is clean as a whistle, I assure you," she said when asked about Sagawa's connection with the scandal which has wiped out half of Olympus's market value, outraged major shareholders and been drawn to the notice of securities regulators in Japan and the Serious Fraud Office in London.

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She gave Reuters her husband's cell phone number but calls went to voicemail and he did not return them.

Former Olympus CEO Michael Woodford, barely a fortnight into his tenure in the top job, raised the alarm on the huge advisory fee after his sudden firing last week. The sum was equal to a third of the 2008 takeover deal to which it related -- compared with the 1-2 percent bankers usually charge.

Woodford, now in the UK, gave Reuters a copy of an independent inquiry into the fee, which was paid in relation to Olympus's $2.2 billion takeover of UK medical equipment firm Gyrus. He had commissioned the inquiry from accountancy firm PricewaterhouseCoopers (PwC) while he was still an executive.

PwC has declined to comment on the report, which is marked confidential and carries no date for when it was compiled.

Olympus, which denies any wrong-doing over the fee payment, has not given details on the identities of the advisers who earned the fee, other than acknowledging that the fees were paid to two obscure firms, AXES and AXAM Investments.

The PwC report identifies Sagawa as the principal of AXES, which was the main advisory firm, though it does not claim to know where the money trail finally ends.

"Sagawa represented AXES in relation to the Gyrus transaction who we understand has resided in the United States from 1980 to the present, including a period stationed in New York for Nomura Securities," the PwC report said.

It said Sagawa was AXES president and "held himself out" to be a director of affiliated firm AXAM which ultimately received the bulk of the controversial fee from Olympus.

In his career on Wall Street, Sagawa had been an investment banker at PaineWebber and Sanyo Securities in the 1990s, according to Financial Industry Regulatory Authority (FINRA) records.

"We understand that members of the board may have had previous dealings with Sagawa prior to his involvement with AXES," the PwC report said.

But it added: "In relation to Olympus' acquisition of Gyrus, we understand that the board confirmed that there were no personal vested interests between themselves and Sagawa or AXES."

The PwC report said that Olympus first hired AXES in June 2006 and agreed to pay a basic fee of $5 million and another 1 percent of any acquisition price. At the time, the Japanese company was targeting a deal with Boston Scientific and Cook Inc, according to the report.

In 2007, AXES was given a bigger shopping list, Tyco International and Gyrus were added as potential acquisition targets, the report said. Olympus also agreed to pay the obscure firm 5 percent of any purchase price for a deal of up to $2.5 billion, it said.

Sagawa's wife denied he was a director of AXAM, incorporated in the Cayman Islands, a tax haven. But she said she had only limited knowledge of her husband's businesses.

Woodford has notified regulators in Japan and fraud investigators in his native Britain of his concerns, though he too has stopped short of making specific allegations of wrong-doing at Olympus. He says he was fired for asking questions.

Before his dismissal, he sought the resignations of Olympus Chairman Tsuyoshi Kikukawa and senior executive Hisashi Mori.

"The eventual cost of the transaction to Olympus is extremely significant and is as a result of a number of actions taken by management which are questionable and which give cause for concern," the PwC report said.

"Based on the review we have undertaken to date, we were unable to confirm that there has been improper conduct, however, given the sums of money involved and some of the unusual decisions that have been made it cannot be ruled out at this stage," it concluded.

The report said AXES was a dormant company. The firm's brokerage license lapsed in May 2008, according to FINRA records. That was three months after Olympus closed the Gyrus purchase.

At the time, the Gyrus acquisition was the largest and most costly acquisition in the Japanese company's history. The more than $2 billion Olympus paid was four times larger than any other company it had purchased.

A security guard at the Manhattan address for AXES said the firm's office had been closed for a couple of years. Contact numbers for AXAM could not be found, and the PwC report says the firm was struck off the Cayman Islands registry in the last year.

Ellen Sagawa told Reuters that her husband was in contact with Olympus "all the time."

"You have to understand, once a Japanese does a favor for another Japanese, the payment is high," she said.

(Reporting by Kevin Gray in BOCA RATON, Tim Kelly in TOKYO, Kirstin Ridley and Alex Smith in LONDON. Writing by Mark Bendeich and Kevin Krolicki; Editing by Neil Fullick, Martin Howell)

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