updated 08:40 am EST, Tue December 6, 2011
Report on Olympus blames outsiders as well
The full text of an independent report (PDF) finding that Olympus hid $1.7 billion dollars has blamed not just the company but outside auditors and banks. While focused on VP Hisashi Mori and internal auditor Hideo Yamada, it also blamed external auditors Ernst & Young ShinNihon and KPMG AZSA for seeing Olympus try to mask losses but doing nothing to stop it. The root was still senior leadership at the camera maker, however, which was not corrupt but showed an endemic problem in Japan with companies where loyalty is more important than ethics, even if staff underneath are honest.
"The core part of management was rotten and the parts around it were also contaminated by the rot," the investigating panel found. "In the worst possible sense, the situation was that of the tribal culture of the Japanese salaryman."
Olympus had lost the amount after making multiple bad securities investments in the late 1980s that came back to haunt the company in the 1990s after the market for them collapsed. Starting in 1998, Mori and Yamada developed a way to try and mask the losses through large advisor fees paid to Axes Japan and Axes America that were routed through a series of funds, including a "secret" mergers and acquisitions account in Lichtenstein.
As leaked earlier, no connections were found to the yakuza, which if confirmed could have brought an immediate police response and would likely have resulted in immediate disgrace for the company.
Investigators nonetheless demanded an overhaul of the board of directors, where most weren't directly involved but had been aware and done nothing. Both Japanese police and the FBI in the US were still investigating Olympus and could force changes. The company is likewise in a race to update its finances before a December 14 cut-off, at which point it would be automatically taken out of the Tokyo stock exchange listings.
Former CEO Michael Woodford, who had been fired to cover up the scandal before he got too close, is demanding that much if not all of the remaining board resign. He plans to talk to shareholders and investors in moves that could push the company into the board changes he demands.