D&G Law

U.S. Investors May Have Limited Recourse in Massive Olympus Fraud

Last week, we emphasized the numerous but unsurprising reports of financial shenanigans these days – which cost investors billions of dollars each year. Today is no different. Olympus Corporation, the Japanese manufacturer of optics and reprography equipment, has announced that it “discovered … that it had been engaging in activities such as deferring the posting of losses on investment securities.” And that’s just the blurb from Olympus’s own website.

Since the scandal erupted in mid-October, Olympus has lost 70% of its market capitalization value (more than $6.4 billion). However, few, if any, U.S. investors will recoup money they have lost due to this massive accounting fraud. Why? In June of 2010, the United States Supreme Court in Morrison v. National Australia Bank, overturned decades of securities law jurisprudence, holding that the U.S. securities laws do not apply to extraterritorial transactions in which, for example, U.S. investors purchase shares from foreign stock exchanges. The unfortunate and unjust result is that U.S. investors who purchased Olympus stock through the Tokyo exchange cannot sue in U.S. court – even though the deceptive or misleading statements were made in this country.

The Olympus scandal provides yet another example of the gutting of our securities laws and the need for domestic protection of U.S. investors from securities fraud.

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