Exclusive: Olympus trail reaches elusive banker's Florida home (Reuters)

BOCA RATON, Florida (Reuters) – A former Wall Street banker of Japanese descent has emerged as a key figure in the scandal engulfing Japanese blue-chip company Olympus Corp (7733.T), according to documents provided by the company's ex-CEO.

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.

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 (BSX.N) and Cook Inc, according to the report.

In 2007, AXES was given a bigger shopping list, Tyco International (TYC.N) 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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Exclusive: Nasdaq hackers spied on company boards (Reuters)

(Reuters) – Hackers who infiltrated the Nasdaq's computer systems last year installed malicious software that allowed them to spy on the directors of publicly held companies, according to two people familiar with an investigation into the matter.

The new details showed the cyber attack was more serious than previously thought, as Nasdaq OMX Group had said in February that there was no evidence the hackers accessed customer information.

It was not known what information the hackers might have stolen. The investigation into the attack, involving the FBI and National Security Agency, is ongoing.

"God knows exactly what they have done. The long term impact of such attack is still unknown," said Tom Kellermann, a well-known cyber security expert with years of experience protecting central banks and other high-profile financial institutions from attack.

The case is an example of a "blended attack," where elite hackers infiltrate one target to facilitate access to another. In March hackers stole digital security keys from EMC Corp's RSA Security division that they later used to breach the networks of defense contractor Lockheed Martin Corp.

Nasdaq had previously said that its trading platforms were not compromised by the hackers, but they attacked a Web-based software program called Directors Desk, used by corporate boards to share documents and communicate with executives, among other things.

By infecting Directors Desk, the hackers were able to access confidential documents and the communications of board directors, said Kellermann, chief technology officer at security technology firm AirPatrol Corp.

Investigators have learned that hackers were able to spy on "scores" of directors who logged onto directorsdesk.com before the malicious software was removed, said Kellermann and another person familiar with the investigation who was not authorized to discuss the matter publicly.

It was still unclear how long Nasdaq's system was breached before the attack was discovered last October.

A Nasdaq spokesman confirmed the investigation into the attack continues, but declined to give further details.

NSA HELPS NASDAQ

Executive Assistant FBI Director Shawn Henry said the financial services sector was losing hundreds of millions of dollars to hackers every year, and the attacks were increasingly "destructive" in nature.

"We know adversaries have full unfettered access to certain networks. Once there they have the ability to destroy data," he told Reuters in a phone interview. "We see that as a credible threat to all sectors, but specifically the financial services sector." Henry declined to comment on the Nasdaq attack.

U.S. Army General Keith Alexander, head of the National Security Agency and U.S. Cyber Command, said the NSA was working with Nasdaq to help protect its network against further attacks.

Alexander told security experts at a Baltimore conference that the United States was shoring up its defenses, but still had "tremendous vulnerabilities" to a growing number of increasingly destructive electronic attacks.

"Nation states, non-nation state actors and hacker groups are creating tools that are increasingly more persistent and threatening, and we have to be ready for that," he said.

Amid a spate of high-profile cyber crimes, the Obama administration wants Congress to pass comprehensive cyber-security legislation that would increase the government's ability to thwart the growing threat.

Alexander and other top officials held a classified meeting with lawmakers on Wednesday and Thursday to discuss the issue, according to sources familiar with the meeting.

Nasdaq CEO Robert Greifeld said in July that the exchange is under constant attack, requiring it to spend nearly a billion dollars a year on information security.

"As we sit here, there are people trying to slam into our system every day," Greifeld said in the interview. "So we have to be ever vigilant against an ever-changing foe."

(Reporting by Jim Finkle. Additional reporting by Jonathan Spicer in New York, Andrea Shalal-Esa in Baltimore and Diane Bartz in Washington. Editing by Tim Dobbyn, Tiffany Wu, and Bob Burgdorfer

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