Camera-maker Olympus admits to window-dressing books
08 November 2011
Troubled Japanese camera- and copier-maker Olympus Corp, in a complete reversal of earlier denials, admitted on Tuesday that it had made a series of acquisitions and inflated payments to intermediares in the past to hide hefty losses. The announcement saw the scrip being hammered down by 30 per cent.
Shuichi Takayama, who was made president of the company last month, accused former chairman Tsuyoshi Kikukawa, executive vice-president Hisashi Mori and auditor Hideo Yamada, of being responsible for the largest accounting fraud in Japan's corporate history.
Analysts are drawing comparisons with the Enron and Worldcom scams in the US, even as the Tokyo Stock Exchange announced that it would consider delisting Olympus scrips from bourse. The Japanese Securities and Exchange Surveillance Commission is also conducting a probe into the accounting fraud.
Blaming the previous leadership – which includes the top three disgraced executives – the company admitted that the appointment of an independent probe panel revealed that inflated payments to intermediaries involved in acquisitions, along with the hefty amounts paid for those deals were used to cover up losses incurred by Olympus since the 1990s.
The Japanese camera-maker and manufacturer of medical equipment also sacked Mori on Tuesday. ''I have no intention to step down at this moment because my responsibility is to fix this company,'' declared Takayama, who till a few days ago was defending the company's earlire acquisitions. ''We needed a higher level of corporate governance. From now on we'll do our utmost not to make the same mistake again.''
The fraud first came to light last month, when Michael Woodford, a Briton, who had been with the company for several years, was sacked days after being promoted as CEO, after he questioned the chairman about the payment of a more than a billion dollars in fees for the acquisition of some small companies to some little-known firms (See: Japanese camera maker Olympus forced to probe high M&A advisory payments).
And a few days ago, Japanese prime minister Yoshihiko Noda was forced to admit that the scandal in Olympus – which was being suppressed by the management – was likely to tarnish his country's image (See: Japanese premier expresses concern over Olympus scam).
Olympus Corp paid $687 million in inflated fees for the 2008 acquisition of UK-based Gyrus Group for $2 billion. Adviser fees in such deals add up to less than one per cent. The Japanese company now admits that the fees were inflated to hide the losses the company had made in the past.