OLYMPUS CORP. chairman and president Tsuyoshi Kikukawa stepped down yesterday in response to a widening scandal over dubious acquisition deals, as sources said Japan’s securities watchdog was looking into the 92-year-old firm’s past dealings.

Kikukawa said in a statement that he had stepped down to restore confidence in the company under the new management and that he would continue to work as a director.

Japan’s main securities watchdog is looking into past Olympus Corp.’s Merge & Acquisition (M&A) deals, focusing on whether the company made appropriate financial disclosures about them, Reuters cited sources as saying yesterday.

The endoscope and camera maker is mired in an escalating corporate governance scandal, with its former British CEO saying he was fired for questioning a US$687 million payment to advisers in the US$2.2 billion takeover of medical equipment maker Gyrus in 2008.

Former CEO Michael Woodford, an Olympus veteran of three decades who says he was fired Oct. 14 after querying odd-looking deals in Britain and Japan, said he was talking to the U.S. Federal Bureau of Investigation as well as Britain’s Serious Fraud Office.

A senior Japanese lawmaker demanded yesterday a probe of “outlandish” advisory payments.

The Japanese monthly magazine Facta first raised red flags about Olympus M&A deals in its August edition, and Japan’s Securities and Exchange Surveillance Commission (SESC) started paying particular attention to the company around that time, said the sources, who were not authorized to discuss the matter publicly. SESC officials declined to comment.

Olympus chairman Tsuyoshi Kikukawa sought to defuse the corporate governance scandal that has enraged investors and halved the venerable company’s share price by pledging to restore trust. He said Tuesday no fraud had been committed.

Kikukawa said in a statement on the company’s Web site: “The acquisitions of the past were conducted through proper valuations and procedures, and there were by no means fraudulent practices. We are preparing to be investigated fairly while launching a third-party committee.”.

“We will strive to conduct our daily business sincerely so as to return to normal circumstances, restore social trust and put customers, business partners and shareholders at ease.”

But Tsutomu Okubo, deputy policy chief of the Democratic Party of Japan, called for probes by financial and securities watchdogs and urged Olympus to explain fees that could risk shareholders losing confidence in Japan.

Shares of Olympus fell more than 10 percent yesterday at 1,072 yen after gaining 8.2 percent in the previous session. The company’s shares had fallen for seven straight sessions through Tuesday, losing more than half their value after it fired its chief executive.

Olympus, which fails to name the Gyrus advisers and has said it does not know their whereabouts, says it forced Woodford out over management issues.

(SD-Agencies)