By A. Ananthalakshmi and Erin Geiger Smith

SINGAPORE/NEW YORK, Dec 21 (Reuters) - A former Singapore banker was arrested in Los Angeles on Thursday and accused of helping "liquidate" hundreds of millions of dollars in an accounting fraud at Olympus Corp, one of the biggest corporate scandals in Japan's history.

Chan Ming Fon, a one-time bank vice president, is the latest former executive and the first from outside of Japan to become ensnared in the $1.7 billion accounting cover-up at the camera and medical equipment maker.

The company has admitted it used improper accounting to conceal massive investment losses under a scheme that began in the 1990s.

Court papers in the United States said Chan was paid $10 million by Olympus or entities controlled by Olympus for his role in the fraud. The case against Chan was filed in a federal court in New York.

"The defendant had a direct role in the secret liquidation of hundreds of millions of dollars of Olympus investments. He then waged a six-year campaign to conceal that misdeed by lying, certifying to auditors that the investments still existed years after liquidation," said FBI Assistant Director-in-Charge George Venizelos.

Olympus declined to comment.

Chan's arrest comes after three former Olympus executives pleaded guilty in September to charges related to the fraud.

Chan, a Taiwan national, was interviewed by the Federal Bureau of Investigations this week, U.S. authorities said. He is being held in custody ahead of a scheduled appearance in a federal court in Los Angeles on Friday.

The former banker at Commerzbank and Societe Generale in Singapore is charged with one count of conspiracy to commit wire fraud, which carries a maximum penalty of 20 years.

Commerzbank and Societe Generale could not be reached for comment.

Chan, 50, is currently listed as a director of three Singapore companies, GIT Capital, GIT Consulting and SJ New Energy.

OLYMPUS STRUGGLE

The accounting fraud at 93-year-old Olympus was exposed in October 2011 by chief executive Michael Woodford, who was fired after he questioned dubious deals that were later found to have been used to hide losses.

The three former executives who pleaded guilty had been identified by an investigative panel, commissioned by Olympus, as the main suspects in the fraud seeking to delay the reckoning from risky investments made in the late-1980s bubble economy.

Former chairman Tsuyoshi Kikukawa, former executive vice president Hisashi Mori and former auditor Hideo Yamada said they inflated the company's net worth in financial statements for five fiscal years to March 2011. They are awaiting sentencing.

Revelations of the huge accounting fraud have revived calls for more outside scrutiny of its boardrooms but have failed to trigger sweeping corporate governance reforms similar to those introduced a decade ago in the wake of U.S. scandals such as at Enron.

Forced to re-issue several years of financial statements, Olympus has been left financially weakened, and it booked a loss of $581 million in the year to March 31. Its shareholder equity to total assets has dipped as low as 2.2 percent, well below the 20 percent level regarded as a minimum for stability.

The liquidity crunch has prompted it to accept $592.49 million from Sony Corp in return for an 11.46 percent stake and an agreement to set up a joint venture to develop medical equipment. The two companies on Friday said that plans to establish that company had been delayed as they wait regulatory approval overseas.

Olympus shares in Tokyo dipped 1.4 percent on Friday compared with a 0.8 percent fall in the benchmark Nikkei 225 index.

TRAIL OF INTRIGUE

Chan's family in Singapore could not be reached for comment on Friday. A neighbour, who described the family as "avid piano players," said they kept to themselves. Nobody answered the door at GIT Capital's office in downtown Singapore.

An investigative panel report, commissioned by Olympus last year, mentioned a banker but used only the name Chan. It said the banker was an outside collaborator who first met Olympus executives Yamada and Mori in 1998.

At the time "Chan" was working at Commerzbank in Singapore, but resigned in 2000, it said. After leaving Societe Generale in 2004, the report said Chan formed his own company where he continued to work for former Olympus executives.

A statement from the U.S. Attorney's Office in New York said Chan was a former bank vice president, without naming the firm.

It said that from 1995-2004 he was employed as an executive at two financial institutions, and his primary responsibilities at one of them was to service accounts maintained by Olympus and entities that Olympus controlled.

The complaint said that in 2005 Chan established an entity in the Cayman Islands called SG Bond Plus Fund.

Until about 2010, Chan submitted false and misleading documents to Olympus's outside auditor regarding hundreds of millions of dollars' worth of assets purportedly maintained by Chan at SG Bond for the benefit of Olympus, it said.

Chan had actually transferred the assets to a British Virgin Island-based entity controlled by Olympus, the complaint said.

($1 = 84.3900 Japanese yen)

(Additional reporting Rachel Armstrong, Saeed Azhar, Tim Kelly and Nathan Layne)

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