What’s Your Preference?

Doug Pardee · #1 (**permalink**) 10-25-2011, 10:00 PM

For those of you not aware, the Olympus Corporation has found itself in the center of a scandal, in which somewhere between $5-10 billion (US) of Olympus funds appear to have been, to be kind about it, mismanaged. Current indications generally are that some Japanese organized crime organization, probably yakuza, took control of the company a few years back, then began draining the company of money through "investments" and "consulting fees".

Earlier this year, Olympus appointed Michael C. Woodford (a Brit) as their new CEO. Woodford didn't like what he saw on the books and called in PricewaterhouseCoopers to do an audit. On the basis of PwC's report, Woodford suggested to Olympus chairman Tsuyoshi "Tom" Kikukawa that this might be a good time for Kikukawa and Executive VP Hisashi Mori to take a quiet retirement, for the good of the company. Instead, Kikukawa and the rest of the Olympus board of directors fired Woodford. Concerned about possible yakuza retribution, Woodford fled Japan on the first available flight out.

Woodford then took the matter public. Here's the letter that he'd written to Kikukawa, detailing Olympus's questionable financial activities (PDF): http://graphics8.nytimes.com/package...etter-text.pdf

What happens next, I guess we'll find out. The most recent annual report from Olympus (link is PDF) doesn't seem to show any serious financial distress, although it seems a bit odd that a company that reported an operating profit of around $500 million last year wouldn't be hurting from losing more than $5 billion over the past few years. According to Japan Subculture Research Center, "One of the auditors involved is considered a corporate blood brother (kigyoshatei) to the Yamaguchi-gumi, Japan’s largest crime group, by law enforcement and regulatory agency sources." So it's unknown how accurate that annual report really is.

Olympus stock price has dropped by about 1/2 since the scandal broke.