( CNN ) -- The drama surrounding Olympus and cover-up of $ 1.7 billion in losses resulted in the first arrests Thursday . Three former executives -- ex-Chairman Tsuyoshi Kikukawa , former Executive Vice President Hisashi Mori , and Hideo Yamada , a former auditor -- were arrested for filing fraudulent information on the company accounts in 2007 and 2008 . Four other outside financial advisers were also arrested for assisting with the fraud . The furor that followed the firing of former Olympus CEO Michael Woodford in October and his subsequent turn as whistleblower on the decades-long cover-up , saw the stock value of the Japanese camera and medical instruments maker drop more than 75 % at the height of the crisis . Besides the charges in Japan , officials in the U.S. and the UK are investigating possible criminal wrongdoing . The company appointed an independent commission , led by a former Japanese supreme court judge , who released a report in December saying , `` the management was rotten to the core , and infected those around it . '' Who is Michael Woodford ? A foreign `` salariman '' for Olympus , the Briton worked for 30 years at the company , starting as a sales assistant in its medical sales division and rising up the ranks to become executive managing director of its European operations in 2008 . In April , he was tapped by outgoing President and CEO Kikukawa to become the Japanese company 's first foreign president , a rarity among Japanese listed companies . Only Howard Stringer , Chairman of Sony , Carlos Ghosn , the head of Nissan , and Craig Naylor of Nippon Sheet Glass currently lead Japanese listed companies . According to Woodford , things began to go awry internally when a Japanese magazine , FACTA , published an expose in July questioning exorbitant fees Olympus paid consultants for a 2008 acquisition deal , and extravagant purchase prices of three small companies . Woodford said that when he began asking Kikukawa and Mori about the deal , he was stonewalled . Tensions escalated until October 14 when at a board meeting Woodford was fired by a unanimous vote . What was the cover-up ? According to a December 6 report issued by the third party set up by the company to investigate Woodford 's claims , the company had inflated fees for the 2008 purchase of Gyrus , a UK medical instruments firm . The fees paid to advisers totaled $ 687 million , nearly one-third of the company 's purchase price . The panel also found the $ 773 million paid for three small Japanese companies -- a face cream maker , a plastic container maker and a recycling business , each with fewer than 50 employees -- were exorbitantly priced to cover-up the company 's loses . The problems at Olympus date back to Japan 's booming 1980s , according to the report . After the 1985 Plaza Accord on currency , Japan 's yen steeply appreciate in value . To offset the losses Japanese corporations saw on the back of a rising yen , companies like Olympus began dealing highly speculative securities , such as derivatives trading , the report said . By 1990 , the losses had mounted and a series of chief executives , ending with Kikukawa , kept the losses secret . The losses were hidden through an intricate scheme that diverted cash through a Cayman Islands account . Police in several countries are still investigating the transaction -- so far , no one has been arrested in the scheme . Was the Japanese mafia involved ? There have been some published reports that the Japanese mafia may have been involved in helping to hide the assets . While criminal investigators may still examine that possibility , the independent committee report said it did not find any involvement of `` antisocial forces '' in its investigations . What 's next ? After his ouster , Woodford talked to investigators in three continents , Japanese legislators about improving corporate governance in the company , and campaigned to retake the helm of the company . Woodford sought the resignation of the entire Olympus board and new management for the company . The Olympus board said it plans to step down , but not until after a special shareholder meeting expected in April to chart the new management direction of the company . In January , citing lack of support from Japanese institutional investors , Woodford abandoned his drive to return to the company , but said he plans to file suit for wrongful termination .
NEW : Seven men arrested in connection with $ 1.7 billion Olympus Corp fraud . The investigation is being led by the Tokyo Metropolitan Police Department and involves a total of seven suspects. Company executives hid $ 1.7 billion in losses in bad investments from the 1990s . Ex-CEO Michael Woodford was fired in October when he questioned shady transactions .