Japan aims to bolster M&A disclosure after Olympus scandal

TOKYO (Reuters) - Japan has signaled plans to strengthen disclosure rules on mergers and acquisitions after a $1.7 billion accounting fraud at Olympus Corp, one of the nation's worst corporate scandals, which involved a series of shady deals.

Financial Services Minister Shozaburo Jimi told reporters that Japan's financial regulator and the Tokyo Stock Exchange would both look for ways of improving disclosure on M&A deals.

"As the resolution of this (Olympus) case proceeds, there is a need to check the workings of the system and discuss policies to prevent a recurrence," Jimi told reporters.

Earlier, the Nikkei business daily said the Financial Services Agency would review regulations to bolster disclosure about takeover targets and fees paid to intermediaries.

Jimi declined to give specifics, saying these had yet to be worked through. He did not give a timeframe.

Olympus, a maker of cameras and medical equipment, has been found to have spent millions of dollars on dubious M&A deals as part of an accounting deceit which hid investment losses from investors for 13 years.

The M&A payments included an exorbitant $687 million advisory fee paid mostly to a now-defunct Cayman Islands firm, which did not come to light until former CEO Michael Woodford blew the whistle on the deal after he was sacked two months ago. Worth about a third of the deal value to which it related, it ranks as the world's largest takeover advisory fee on record.

The scandal has sparked criticism of Japan's corporate governance and disclosure practices and has also spurred major political parties to consider possible reforms.

Olympus has lost more than half its market value since the scandal broke in October, when Woodford went public with his concerns over the massive advisory fee and other deals.

Woodford now wants to be reinstated and to replace the entire board with his own slate of candidates. The current board plans to resign soon but wants to choose its own successors before standing down, setting up the prospect of a proxy war over who will lead Olympus out of the crisis.

After restating its accounts this week, Olympus is under pressure to repair its balance sheet by forging an equity alliance, selling assets or raising fresh capital.

The stock fell 5 percent to 989 yen on Friday. It has fallen by nearly one-third since it released its restated accounts and is down more than 60 percent from pre-scandal levels.

Olympus will meet with its creditors on Friday afternoon to discuss its restated accounts and its financial situation.

(Reporting by Noriyuki Hirata and Lisa Twaronite; Writing by Edmund Klamann)

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After NATO strike, Pakistan adjusts rules of engagement

ISLAMABAD (Reuters) - Pakistan's commanders in the wild Afghan border region can return fire if under attack without waiting for permission, the army chief said on Friday, a policy change that could stoke tensions after Saturday's NATO strike killed 24 Pakistani troops.

Exactly what happened in the attack is unclear. Two U.S. officials told Reuters early indications were that Pakistani officials had cleared the NATO air strike, unaware they had troops in the area. A Pakistani official denied this.

The attack sparked fury in Pakistan and further complicated U.S.-led efforts to ease a crisis in relations with Islamabad, still seething at a secret U.S. raid in May which killed al Qaeda leader Osama bin Laden, and stabilize the region before foreign combat troops leave Afghanistan in 2014.

"I do not want there to be any doubt in the minds of any commander at any level about the rules of engagement," Chief of Army Staff General Ashfaq Kayani said in a communique on Friday.

"In case of any attack, you have complete liberty to respond forcefully using all available resources. You do not need any permission for this."

A military source explained that this amounted to a change in the rules for Pakistani forces guarding the Western border against militant movements to and from Afghanistan.

"In the past, we were only guarding ourselves or reacting against militants," said the source, who requested anonymity because he is not authorized to speak to the media.

"We have given our posts some more space to respond. If they are under attack, they should not wait for orders from above on whether to return fire or not."

The increase in autonomy for local commanders is likely to raise tensions in the unruly and mountainous border region, which is porous and poorly marked. Militants and tribespeople alike move back and forth daily.

"There are certain inherent risks in the delegation of authority," said defense analyst and retired general Talat Masood. "There could be unintended consequences."

Exactly what happened at the Pakistani posts along an unruly and poorly defined border is still unclear.

Pakistan said the attack was unprovoked, with officials calling it an act of blatant aggression -- an accusation the top U.S. military officer flatly rejected in an interview with Reuters.

Two U.S. officials told Reuters on Friday that preliminary information from the ongoing investigation indicated Pakistani officials at a border coordination center had cleared the air strike, unaware they had troops in the area.

The U.S. officials, speaking on condition of anonymity to confirm details first reported by the Wall Street Journal, said an Afghan-led assault force that included U.S. commandos came under fire from an encampment along the border with Pakistan.

The commandos thought they were being fired on by militants but instead the fire came from Pakistani troops, they said.

A Pakistani military official categorically denied that account, saying the aircraft had already engaged when Pakistan was contacted.

"Wrong information about the area of operation was provided to Pakistani officials a few minutes before the strike," said the official, who was not authorized to speak to the media.

"Without getting clearance from the Pakistan side, the post had already been engaged by U.S. helicopters and fighter jets. Pakistan did not have any prior information about any operation in the area."

In a statement on its public relations website, Pakistan's military said that its response to the NATO strike was hampered by an inability to scramble its aircraft in time.

"The response could have been more effective if PAF (Pakistan Air Force) had also joined in. However, it was no fault of PAF," the statement said.

"The timely decision could not be taken due to breakdown of communication with the affected posts and, therefore, lack of clarity of situation, at various levels, including the Corps Headquarters and GHQ (General Headquarters)."

The Pentagon has declined to comment on details from the investigation until it is complete. Pentagon spokesman George Little acknowledged at a news conference that Pakistan had been asked but "elected to date not to participate" in the inquiry.

SOUND AND FURY

The United States and NATO have promised to investigate the incident, expressing regret on the deaths of Pakistani soldiers but the White House said it was premature to consider an apology when an investigation was still in its early stages.

Pakistan has shown its anger over the attack by blocking ground supply routes for NATO forces in Afghanistan, and pulling out of an international conference in Germany next week on Afghanistan, depriving the talks of a central player in peace efforts.

"I think it's safe to say that the incident has had a chilling effect on our relationship with the Pakistani military. No question about that," said another Pentagon spokesman, Captain John Kirby.

Western leaders have urged Islamabad to rethink its decision to boycott the conference, but the Pakistani parliament's national security committee Friday endorsed the decision.

Prime Minister Yusuf Raza Gilani said Pakistan's contributions to regional peace efforts have not been appreciated and his country has become a scapegoat for the "failings of international policies in Afghanistan."

"Clearly, there is a limit to our patience. Cooperation cannot be a one-way street," he said.

In Karachi, calls for defiance laced Friday prayer sermons.

"This (the NATO attack) is sheer cruelty and the rulers and the public must join hands to defend our country," an imam said at the Jamia Masjid mosque in an upscale neighborhood. "It's time we decide that we can spend our lives as poor people but not as slaves of Western powers.

"We should have complete faith in Allah, and if you follow Islam in the true spirit, we will have no problems surviving even if the U.S. and Western powers don't like us."

At a rally by the militant group Sipah-e-Sahaba, some 2,000 protesters held placards that read: "Jihad is the only response to the U.S." and "Friends of the U.S. are traitors to Islam."

In the city of Multan in southern Punjab, at a demonstration organized by an Islamist group, Abdul Ghaffar, 45, said: "We're going to teach America the kind of lesson that is going to make them forget about Vietnam."

(Additional reporting by Augustine Anthony in ISLAMABAD, Asim Tanveer in MULTAN, and Faisal Aziz and Imtiaz Shah in KARACHI and Phil Stewart in WASHINGTON; Writing by Chris Allbritton; Editing by Nick Macfie and Yoko Nishikawa)

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Cain campaign crumbling after affair allegation

WASHINGTON (Reuters) - Republican presidential contender Herman Cain told aides on Tuesday he would reassess the viability of his struggling campaign after an Atlanta woman accused him of conducting a 13-year extramarital affair.

The allegations could be the end of the political line for Cain, who led the Republican White House race barely more than a month ago but has nosedived in polls after a series of sexual harassment charges and campaign missteps.

Cain, 65, denies he had an affair with businesswoman Ginger White, who told an Atlanta television station that her on-and-off relationship with Cain began in the mid-1990s.

In a fundraising email to supporters entitled "Stand With Me," Cain called White a "troubled Atlanta businesswoman" who is pushing a "fabricated, unsubstantiated story."

"I do know Ms. White. I have helped her financially at times over the past few years, just as I have helped many friends and acquaintances throughout the years. I thought Ms. White was a friend in need of a supportive hand to better her life," he wrote.

The former pizza executive told aides in a conference call transcribed by the conservative magazine National Review that he would gauge the impact of the charges over the next few days and see if they created a cloud of doubt in supporters' minds.

"Obviously, this is cause for reassessment," Cain told staff members, adding he would continue his campaign schedule over the next few days.

"The public will have to decide whether they believe her or whether they believe me. That's why we're going to give it time, to see what type of response we get from our supporters," he said.

The news began to take a toll on Cain in New Hampshire, where WMUR television reported that two Cain supporters, state representatives William Panek and Sam Cataldo, will now back Newt Gingrich.

LITTLE TIME BEFORE IOWA

The allegation of an affair comes five weeks before Iowa kicks off the Republican battle for the right to challenge Democratic President Barack Obama, giving Cain little time to resurrect a once high-flying campaign.

In addition to sexual harassment allegations by four women, Cain also has stumbled on the campaign trail. He raised alarm among conservatives with confusing comments about abortion and badly fumbled a question on Libya policy.

His fundraising also appears to have stalled. Aides who crowed about his strong surge in donations in October have declined to answer questions about his cash flow in recent days.

"It's over for Cain. On the heels of everything else, I don't see how you come back from this," Republican strategist Rich Galen said.

Cain's difficulties have opened the door for Gingrich, the former House of Representatives speaker who has zoomed to the top of opinion polls with the support of conservatives hunting for an alternative to the more moderate Mitt Romney in the Republican race.

Conservatives have failed to coalesce around a single candidate this year as several contenders - first U.S. Representative Michele Bachmann, then Texas Governor Rick Perry and then Cain - have risen in polls only to fall back.

'ONE MORE THING'

"I don't see a path to victory for Cain anymore," said Ryan Rhodes, founder of the Iowa Tea Party. "He was already looking at the end of the line, but this is one more thing to finish him."

Gingrich has seen his poll numbers rise as Cain's crumbled. Support for Romney, the former Massachusetts governor, has held relatively steady in the mid-20s in polls for much of the year.

Gingrich, who is in his third marriage, told CBS News the accusations did not disqualify Cain and he should be given a chance to recover.

"Remember, I was supposed to be dead in June and July," said Gingrich, who hit bottom in opinion polls after a mass staff exodus over the summer. "I am not going to go around and declare anybody else dead."

The Cain campaign worked to reassure supporters that the scandal would not end his bid. Steve Grubbs, Cain's Iowa chairman, said he was unaware of any volunteers who had backed away from their support.

He sent state backers a memo reminding them that Democrat Bill Clinton and Republican John McCain survived accusations of extramarital affairs during past races.

"What Herman Cain is going through is not unique," Grubbs told Reuters. "It's certainly a challenge and it's a distraction, but we're weathering the storm."

On the conference call with aides, Cain said the claims of an affair were taking an emotional toll on him and his wife but he promised to wage an upbeat campaign starting with an appearance in Michigan on Tuesday night.

Cain said his planned reassessment was similar to what he did at earlier key junctures in the race.

"During the summer we had to make some reassessments based upon our financial situation," he said. "We also did a reassessment after the Iowa straw poll and we made another reassessment after the Florida straw poll."

The charge of an affair differs from prior harassment claims in that White says she had a consensual long-term relationship.

White said the two met at a presentation Cain gave for the National Restaurant Association in Kentucky, and afterward the two had drinks. Cain invited her back to his hotel, she said, and the relationship took off.

The woman provided cellphone bills showing calls to a number she said was Cain's personal mobile phone.

(Additional reporting by Kim Dixon; editing by Doina Chiacu and Mohammad Zargham)

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