Hi, Please reset the camera settings using the instructions on the attached photo.
If the problem is not cleared by the reset, then, unfortunately what you have described indicates that there is a problem with the ccd (the light sensitive chip that produces the image) or the connection to it, and while your camera is not on any current list of cameras for possible free repair, the information at the link below does fully explain the problem and tells how Panasonic handled it. Since more and more models from the same time period have the identical problem the info may give you some leverage with Olympus. Click on or copy and paste the link into your browser
You can contact Olympus support at the link below using the information at link below
Please keep in mind that my diagnosis & solutions provided are directly dependent on the accuracy of your description of the problem. As with any "do it yourself" fixes, success is a "team effort", since I can't see or touch the camera, and relies on the customer's manual dexterity and ability to follow the instructions well.
If you require additional information, please use the Reply to Expert Tab to contact me. Click the ratings only after our exchange is complete and you are satisfied.
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You can try a manual "hard reset":
Remove the battery, lens and the memory card.
Put the power switch in the ON position
Allow the camera to sit idle foe 30 minutes
Put the power switch in the OFF position
Remount the lens and insert the battery and memory card
Power the camera on and try it out.