Just when a pleasant autumn wind was rising, Olympus blew up with a scandal that — depending on how it’s handled — may seriously degrade the foreign investor view Japanese corporations. Although, it appears that Olympus may avoid de-listing, but there’s a lot it still hasn’t answered.
The details can be had elsewhere, but the Cliffs Notes summary is that Micheal Woodford, a long-time employee and the first foreign CEO of Olympus was unexpectedly and with remarkable speed fired by the board of directors for not having cross-cultural understanding. It quickly became obvious that what he could not understand was why in the world Olympus would squander billions of dollars on companies that existed almost entirely on paper and nothing more.
Amazingly, Olympus stuck to its position, saying that there was nothing wrong with its acquisitions and that it was right to fire Mr. Woodford. To support this statement it offered no evidence, but instead tried the “Blame the Employee” tactic. This tactic might have worked at one time, but now largely results in self-embarrassment, particularly if the employee was your CEO and he has copies of all the relevant corporate documents in his possession.
For Mr. Woodford, the documents were crucial in making his case to the news media and investigative authorities in the U.S. and Britain. He didn’t have to take his documents to the news media, but it was an effective way to pressure Olympus to move things along. And, boy, things moved along — a week ago Olympus admitted that the deals were to cover up bad debts from the 90s.
Olympus seemed to think that this was a good explanation. Except that it wasn’t. The press and analysts reacted with, “Holy shit, you’ve been doing this for 20 years? What else are you hiding?” (I’m paraphrasing.) Apparently, holding bad debts until a more appropriate time was an accepted practice back then, but this would indicate that Olympus has institutionalized corruption for more than two decades.
Now, with this much money involved in this particular manner (disappearing companies in the Caymans), it made sense that the next question to be asked was: How much of the cost of these deals was to cover postponed bad debts and how much was for services? There’s no immediate strong evidence of extortion, or the involvement of organized crime or even disorganized crime, but Olympus’ story just has too many wholes in it for the question not to be asked. Of course, this type of crime — high-dollar and high-collar – doesn’t need yakuza or the mafia to be involved, as US companies have so ably demonstrated. Bernie Madoff wasn’t an organized crime type, but he was organized and he committed a huge crime.
For now, we are left with an intriguing story that has only become more intriguing, because of its opaqueness. Mr. Woodford seems to have weathered the ad hominem attacks that are always directed at whistleblowers. There is even call among some Olympus investors to bring him back as CEO, but that is still over a distant horizon and investigative wheels have a tendency to turn slowly in Japan.