By Sophie Knight
TOKYO (Reuters) - Britain's fraud agency will prosecute Olympus Corp (TYO:7733) and its British unit Gyrus for falsifying accounts, the Japanese medical equipment maker said on Wednesday, dragging a $1.7 billion accounting scandal back into the spotlight after it erupted nearly two years ago.
Olympus plunged into the red and its share price tanked after details of massive hidden losses were discovered late in 2011, but it has since swung back into profit and Sony Corp <6758.T> paid 50 billion yen ($500 million) to become its biggest shareholder this year.
The move by the British Serious Fraud Office (SFO) revives the scandal after a guilty verdict for three former executives in a Japanese court in July and a subsequent share issue gave the appearance that Olympus had put the incident behind it, with its stock trading back at pre-scandal levels.
The three executives were fined a combined 700 million yen and handed suspended sentences.
The company's shares slid as much as 6.3 percent on Wednesday after the company said the SFO would prosecute Olympus and Gyrus Group Limited for a suspected breach of the UK Companies Act of 2006 by falsifying financial accounts in fiscal 2009 and 2010. The shares later trimmed losses to end down 2.9 percent at 2,798 yen.
Olympus said this would mark the first time the SFO had decided to prosecute a company, rather than an individual, for fraud, and that the lack of precedent made it unclear how long proceedings may take or what level of fines may be imposed. It added that court proceedings would begin this month.
An Olympus spokesman said the firm was also still under investigation by the U.S. Department of Justice.
Olympus bought Gyrus, a British medical equipment firm, for $2 billion in 2008. In addition to paying the world's largest M&A advisory fee, equivalent to one-third of the purchase price, Olympus later wrote down the value of the deal along with a handful of other acquisitions.
The deal was part of a scheme to cover up investment losses dating back as much as a decade or more, which came to light when Olympus's British chief executive at the time, Michael Woodford, blew the whistle after being fired from the company for pressing for details on the investments.
($1 = 99.8050 Japanese yen)
(Editing by Chris Gallagher)