A third party panel appointed to investigate shady accounting practices at Olympus Corp. has found that the Japanese camera maker hid at least $1.7 billion in investment losses dating back to the mid-90s. The report, issued Tuesday, also found that the dubious transactions were concealed by select top executives, bankers who submitted incomplete financial statements and external auditors who didn't do enough to expose the cover-up.
The six-man panel was assembled after the company's now ex-CEO, Michael Woodford, essentially blew whistle on the bookkeeping fiasco, a move that eventually led to his dismissal. Olympus originally denied the allegations, but eventually admitted that it had hidden losses through various acquisitions and bloated advisory fees.
The 24-page document points blame at former executive vice president Hisashi Mori and former internal auditor Hideo Yamada, who teamed up with a number of banks to mask losses related to the tech bubble bursting in the 90s. The panel recommended that the board be cleaned out and new management be installed to distance the company from the scandal.
“The core part of management was rotten and the parts around it were also contaminated by the rot,” the report read.
The New York Times reports that the cover-up involved an astounding $687 million fee paid out to a now-defunct firm that advised the company during its acquisition of U.K. medical equipment maker Gyrus. Another $773 million was doled out to acquire three Japanese companies unrelated to Olympus' camera and endoscopy businesses that lost much of their value soon after.
The panel also criticizes two external auditors – KPMG AZSA and Ernst & Young ShinNihon – which reportedly did little to investigate or shine light on the shady behavior.
“A factor in the longevity of the cover-up was the existence of external players who advised, helped and assisted in the concealment while knowing full well that such accounting practices were illegal,” the report read.
On a positive side, panel members found that no links to organized crime – something that many had suspected – and that no executives personally profited from the accounting handiwork or the cover-up. However, many media outlets are questioning whether the panel – assembled by the board – had the time and resources to fully investigate the potential involvement of the mob.
In fact, panel chairman Tatsuo Kainaka told the Times and other news outlets at a press conference that they did not know “for sure where funds ultimately flowed to and how” but “could not find any evidence of a flow of funds to organized crime.”
Authorities in Japan, the U.S. and Britain are now conducted a criminal probe into the matter. Former CEO Woodford told Reuters that he will travel back to Japan in the coming days to meet with shareholders and continue his proxy fight.
Beecher Tuttle is a TMCnet contributor. He has extensive experience writing and editing for print publications and online news websites. He has specialized in a variety of industries, including health care technology, politics and education. To read more of his articles, please visit his columnist page.
Edited by Jennifer Russell