Scandal in Blue Chip Japanese Company is Salt to Economic Wounds
If Japan had did not have enough problems with natural disasters and a rapidly appreciating yen that is making its manufactured products uncompetitive and leading Japanese companies to consider upping stakes and relocating overseas, Japan is now plagued with a major corporate scandal.
The scandal involves the Olympus Corporation, a company familiar to photographers, but one that makes its major earnings from scientific and medical equipment.
The scandal is so malodorous that Japanese Prime Minister Yoshihiko Noda was forced to speak out, even though Olympus is a private company. Mister Noda said that he did not want people to generalize from one company and draw the conclusion that "Japan is a country that does not adhere to the rules of capitalism".
The problems started in April, when Olympus appointed Michael Woodford to the post of president of the company (he was named CEO in October). Woodford, a 30 year company veteran, had revolutionized the company's European operations, making them responsible for half of corporate profits.
By mid October, Woodford was a man without a job. The company claimed that the dismissal was prompted by cultural incompatibility. Woodford was repotedly told by a colleague to "catch a bus to the airport".
Woodford's problems at Olympus began when he started asking questions about recent Olympus corporate acquisitions, such as that of medical equipment provider Gyrus for $2.2 billion. The acquisition was accompanied by a payment of $686 million in advisory fees --nearly a third of the transaction itself-- to two obscure firms based in New York and the Cayman Islands.
Woodford found such payments inexplicable and one Japanese magazine claimed that payments had been funneled to "antisocial forces", a Japanese euphemism for "the mob". Other acquisitions involved equally overgenerous payments for the consulting firms.
Woodford returned to United Kingdom and took his concerns to Scotland Yard and the FBI. The American Securities Exchange Commission is also involved in the inquiry.
Back in Japan the company is under pressure to appoint independent third-party investigators. Minority shareholders have demanded access to company minutes related to the recent acquisitions. Additionally, the minority shareholders are asking who will be accountable for the 50% collapse in the share price of the company, long considered a blue-chip.