Japan's Olympus on Tuesday admitted to hiding losses on securities investments dating back to the 1990s and that it used funds related to recently scrutinised acquisitions to help do so.
Analysts said the future of the 92-year old firm was now heavily clouded by the revelations as its shares plunged 29 percent on fears it may face delisting.
It was its first acknowledgment of wrongdoing since a third-party panel was set up to probe claims of overpayments in four deals brought under the spotlight by the ousting of Olympus' British chief executive Michael Woodford on October 14.
Having defended the payments made in four deals between 2006 and 2008, Olympus backtracked on Tuesday to say that fees to advisers were used to help hide losses on investments that dated back to the 1990s.
Olympus president Shuichi Takayama bowed in apology to reporters for what he called "inappropriate accounting" at the camera and endoscope maker, exposing one of Japan's biggest loss-hiding schemes in recent years.
The company said three executives helped conceal the losses.
Olympus said executive vice president Hisashi Mori had been dismissed over his role in the cover up, and said that the company's auditor Hideo Yamada had signalled his intention to resign.
Former Chairman and President Tsuyoshi Kikukawa, who removed Woodford, was also involved, Takayama said Tuesday. Kikukawa resigned on October 26 amid investor and media scrutiny.
Olympus shares on Tuesday plunged 29 percent to their lowest level since 1995. Around 70 percent has now been wiped from the company's share value since October 13, the day before Woodford was removed.
At a hurriedly arranged press conference, Takayama apologised for the company's failure to book past losses, saying he found out about it on Monday.
"Vice president Mori reported to me yesterday evening that losses on securities investments have been deferred since around the 1990s," he said.
"Inappropriate accounting practices occurred, but we will wait for the finding of the committee," he said, adding that the size of the deferred losses could not be disclosed until the panel had completed its investigation.
Asked about a possibility of filing a criminal complaint against the three executives, Mori said: "I will consider if necessary."
Olympus said investment losses made in the 1990s -- which had been kept off the books -- were then covered up by funnelling money through funds paid in the acquisition of Gyrus Group PLC and expensive purchases of three small Japanese firms.
The four deals include a $2 billion deal for British medical-instruments company Gyrus, in which Olympus has admitted paying $687 million to a little-known financial adviser based in the Cayman Islands.
The fee totalled more than a third of the company's purchase price, much larger than the one or two percent normally charged in acquisition deals.
Also under scrutiny are the purchases of three small Japanese companies unrelated to its core precision instruments business for a total of 73.49 billion yen ($941 million at current rates).
The company heavily wrote down their value a year later.
"We cannot rule out the possibility" that the former management will face a criminal prosecution or that the company will be delisted, said Hideyuki Araki, economist at Resona Research Institute.
"This is a very big shock because Olympus has such a respected name and is of such a large size.
"This will likely have a negative impact on the company, especially as more and more consumers look at what companies do in fields such as social responsibility before choosing their products."
Woodford was dismissed only six months after being appointed president and two weeks after he was also named chief executive.
The 30-year company veteran, Olympus' first non-Japanese president and chief executive, said he was removed after he wrote to then-chairman Kikukawa and urged him to resign over the payments, citing major governance concerns.
Kikukawa assumed Woodford's roles but, under increasing pressure as media scrutiny and shareholder anxiety intensified, resigned in late October.