Scandalus Olympus: ex-CEO alleges financial fraud

Michael C. Woodford (shown above), the former CEO of Olympus, says the Japanese technology company is involved in a whole lot of financial hanky-panky. The Olympus board says the 51-year-old British national, the first non-Japanese CEO in the company's history, was a bad manager. But he claims he was forced out when he began asking questions about $1 billion in payments for acquisitions made before he took the reins.

My favorite line in the scandal so far (and remember now, Olympus mostly sells cameras and medical imaging equipment): “There were $800 million in payments to buy companies making face cream and Tupperware,” said Woodford. “What the hell were we doing paying $800 million for these companies?”

More: Financial Times, Bloomberg, New York Times, and here's an internal letter published by the New York Times with Woodford's consent (PDF link).

(via Hiroko Tabuchi, Adario Strange, photo: REUTERS/Yuriko Nakao)



  1. I can always be counted on to miss the joke, but unless this guy/company has ties to a pop band from Oz, shouldn’t the headline begin with “Scandalous Olympus”?

  2. I’ve personally noticed the glass ceiling for foreigners in Japan. Asking inconvenient questions like “Why are we doing this,” “Isn’t this counterproductive,” and that old classic “How will this help our customers?” are sure ways to earn icy stares and arrest your career.

  3. That’s a really bizarre story. It almost seems TOO simple – like the kind of financial chicanery that a rookie would pull off. Except that it involved hundreds of millions of dollars.

    And this is why shareholders need to keep an eye on the boards of companies they invest in – otherwise, they can fall into this kind of trap, where the big guy makes worse and worse decisions and the board always backs him up. The company will survive this – the head honchos likely won’t.

  4. I was in stitches over their london address never found on popular maps until google appeared out of the clouds

  5. Well I see that it looks as though Japanese Business practices haven’t changed since the banking crisis and the “Lost Decade”.
    Nice work if you can get it, a wink and a nod for $800 million.
    It appears the old boy system lives on in Japan, in a big money type of sense.

    1. Been around since before then. They just reorganized it from being centered around families to be centered around banks. I am tempted to claim that it is part of the very cultural fabric of the nation.

  6. Companies in Japan tend to get involved in unrelated business to a greater extent than their US counterparts. The Hankyu Corporation for example owns train lines, the Takurazuka Revue, a staffing company, a real estate company, hotels, a chain of department stores, travel agencies and soba restaurants.  Something may truly be amiss with Olympus, but the fact that there’s no seeming relationship between the individual ventures of a Japanese company is not particularly suspicious. It’s easy to imagine a situation where this falling out occurred due to Woodford’s lack of deference to the ‘Japanese way of business’ compounded by the inflexibility of the board.

    This is only tangentially related, but I recently learned that companies in that country can cancel the planned employment of a graduating college student who participates in political demonstrations, and there’s no legal recourse for the student.  Activists in the 60s were widely blacklisted later on. Supposedly companies worry that employees with enough of a social conscience to participate in demonstrations will become whistleblowers later on. Democracy in action, folks!

  7. There are sickening amounts of corruption and dodgy deals done by Japanese corporations & government. It’s as systemic as can be and sad… Maybe the reason that Japan has the world’s largest sovereign debt is because of decades of companies flushing potential profits down the ass-spraying-toilet to pay off those who need their kick-backs.

  8. This is a sneak preview of how American business will be run for the next 20 years. In an environment of depressed equity prices, every upper manager who made their money via options still wants their net value to increase because that’s how they define their self worth; they will be receiving smaller bonuses as the economy contracts and the pay increases they have enjoyed for so long will start to be squeezed so the only option left is fraud. Ugly.

  9. Everyone says that we should be afraid of Asia being the next economical superpower ruling the world. I tell you (here from Asia): no, they won’t and NEVER will simply because the degree of corruption raises by factor 5 with each million an individual / company / government is making. The western counterparts factor is more like 4.6. So we can relax. They will fail at their own desease.

  10. “None of the allegations against *** have been proven in court.”
    (from a Canadian news article I just read. I just  love it when people wait to assume guilt until it’s proven.)

  11. ” every upper manager who made their money via options still wants their net value to increase because that’s how they define their self worth;”

    Dude, this is about a Japanese company. Japanese companies do not work that way. And upper managers here earn only a little more than lower level workers. (relatively). Shame is a much bigger motivator than greed.

  12. “Tom, aside from the poor judgement you acknowledged to me in our meeting on Thursday 29 September in relation to the acquisition of Altis, Humalabo and News Chef, it is truly extraordinary and frankly unbelievable that …”

    Anyone else get a feeling when reading that super-confidential internal letter, that it was written with the expectation that it would soon be public?

    For now, I reserve judgement on all parties and sit happily knowing I don’t hold Olympus stock.

    1. No surprise there. Rule #1 of corporate politics: whenever you put something in writing, assume it will eventually be disclosed to everyone.  This is more and more important the more you go up the power chain and outside your trusted circle of “feudal” loyalties, and these guys clearly didn’t share such a bond.

  13. “…, it is truly extraordinary and frankly
    unbelievable that Olympus, a major Nikkei listed public company, made a series of payments 
    approaching USD 700 million in fees (equivalent to approaching 35% of the purchase price of Gyrus) to a 
    company in the Cayman Islands, whose ultimate ownership is still unknown to us, preventing the auditors 
    from verifying that no related parties were involved.  If the facts, both in relation to the absolute amount 
    paid in fees and that we don’t know to whom these payments were made, were openly known by all our 
    shareholders in Japan and around the world, it would be profoundly damaging to the company’s 
    reputation.  As the PwC report highlights, three months after Olympus made the final payment to AXAM 
    of USD 620 million, AXAM Investments Limited was struck off in June 2010 for non-payment of licence 
    fees. “

  14. Oh, so mucky!  Ooooh the smell of gangsters!   Smile, you’re on Olympus Camera!

    Note that much of Japanese business is entwined in “Keiretsu” – so that corporate entities are intermingled with others through cross-directorships, networked shareholdings and other legalistic mechanisms to dilute the power of the shareholder legal structure, and transfer control more to inter-related parties.

    But this is incompetently dirty – the way the advisors were paid was they “bought” the (preference) shares and then a few months later marked them up at a higher price for sale to Olympus!  Let alone legality, it’s only the barest of thin veils to disguise the transfer of $700m, demonstrating an immense (and unfortunate) arrogance in proceedings.

    This UK chappy has outplayed the Olympus board.  This kind of public humiliation, coupled with a 25% decline in share price since he was sacked, is unprecedented.

    Who knows what’s in it for him – maybe a little slice of the $1.5bn that he’s spotted wandering erratically away.  And that’s only the stuff he spotted!

    Lordy be, so much more will come of this – what about all the UK advisors on the deals in the UK?!  Why didn’t they say anything!!!

    Ah, big business, such a dirty beast!

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