Tokyo, Japan—Following the October 14 firing of Olympus Corp.’s CEO/president, Briton Michael C. Woodford, the company remains plagued by scandal. Today, its new president, Shuichi Takayama, publicly admitted Olympus had in fact covered up investment losses since the 1990s by using acquisitions to clear its books.
Its former chairman, Tsuyoshi Kikukawa, who took over as president/CEO following Woodford’s dismissal, resigned on October 26 to restore confidence in Olympus, whose shares declined by 56% after Woodford’s ousting. Woodford said he was fired because he questioned an inexplicable $687 million advisory fee linked to a $2.2 billion takeover in 2008 and other deals that destroyed $1.3 billion of shareholder value. Shuichi Takayama, the head of Olympus’s camera division, was then named president, and now Takayama has apologized for the loss-hiding scheme.
The admission exposes one of the largest loss-hiding cover-ups in Japanese corporate history, and the Tokyo Stock Exchange and the U.S. Federal Bureau of Investigation are investigating the 92-year-old camera/endoscope maker. As a result, Takayama announced that Olympus is cooperating with a third-party committee investigating the deferral in posting losses.
The board also dismissed the director and executive vice president, Hisashi Mori, who they said was involved with the loss hiding, and are also expecting the resignation of the company’s corporate auditor, Hideo Yamada, who had a part in arranging the billions of dollars in payouts made to a group of elusive Cayman Islands-based funds.
“It is a fact that we carried out inappropriate accounting,” said Shuichi Takayama at a press conference in Tokyo, twice bowing in apology. Takayama blamed three Olympus executives—former chairman Tsuyoshi Kikukawa, vice president Hisashi Mori and corporate auditor Hideo Yamada—for the scheme, adding he wasn’t aware of it until Mori told him about it on November 7.
The company had apparently “cleared up” the paper losses on investments, effectively writing them off by funneling money through funds used to conduct the controversial deals. Those deals include the acquisition of U.K. medical-technology firm Gyrus Group PLC and expensive purchases of three small Japanese firms.
Woodford, a 30-year Olympus veteran, became president in April 2011—one of a few non-Japanese to run a large Japanese corporation. Six months later, the Olympus board unanimously dismissed him because he “largely diverted from the rest of the management team in regard to the management direction.”
“We hoped he could do things that would be difficult for a Japanese executive to do, but he was not able to understand that we needed to reflect the management style we have built up since the company was established 92 years ago, as well as Japanese culture,” Kikukawa said at a news conference announcing Woodford’s dismissal.
Woodford publicly charged he was fired for questioning the $687 million advisory fee linked to a takeover in 2008 and other deals that destroyed shareholder value. The acquisitions are said to have wiped out more than half the company’s market value in two weeks. He then called for the resignation of Olympus’s board and sent dossiers on its suspicious deals to Britain’s Serious Fraud Office, Japan’s Securities and Exchange Surveillance Commission and the U.S. Federal Bureau of Investigation.
Olympus responded that Woodford used his position to leak company secrets and he aimed “to ruin the credibility” of the camera maker, and it was considering legal action against Woodford, who still retains a seat on the board.
The fallout resulted in the resignation of the chairman, Tsuyoshi Kikukawa, a 50-year Olympus veteran, while its new president, Shuichi Takayama, who has been with Olympus for 41 years, reiterated the company’s line that it had done nothing wrong.
Woodford then charged that Takayama had also failed to demand explanations about the fees. “The only way you can stop the company heading for the rocks is by answering the questions. Why was the $687 million paid? Who was it paid to?” he said in a phone interview with Reuters.
Takayama responded at a news conference, stating there was no problem with fees paid by Olympus and the company was extremely angry that Woodford revealed internal information while he was still a director. That changed on November 8, when Takayama announced Olympus would investigate the scheme through a third-party committee and would immediately disclose all findings. Takayama also apologized to the company’s “shareholders, investors, trading partners and all other relevant parties.”
Following Takayama’s November 8 revelation, Woodford said he would consider returning to Olympus as CEO if the shareholders wanted that. But at the Tokyo press conference, Takayama said Olympus had no plans to reinstate Woodford, and repeated that he was dismissed for differences in “management style.” olympus.com
