PAGE ONE: COVER-UP STRIKES AT JAPAN’S HEART
Picture: Woodford is preparing to fly back to Japan next week, and from there to the United States where he has another meeting with the Federal Bureau of Investigation
Photo credit: C Cheesman
The Olympus financial scandal goes much deeper than anyone anticipates, fears the company?s former CEO Michael Woodford who was sacked last month after questioning suspicious payments.
In an interview with Amateur Photographer (AP) magazine Woodford also revealed that he would retain the camera business if reinstated as Olympus boss.
NEWS UPDATE 15 DECEMBER:
Olympus president Shuichi Takayama said Olympus may need to enter a tie-up with another company after corrected business results revealed a huge hole in the company balance sheet. Speaking at a press conference in Tokyo, Takayama told reporters that a merger was one of the options on the table after Olympus was forced to reveal the true state of its business in the wake of a £1.1 billion accounting scandal dating back to the 1990s. The amended accounts show that Olympus’s net assets fell to 46 billion yen at the end of September 2011, down from a restated 225 billion yen in March 2007.
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?It?s probably the biggest financial story of the 21st century, but it?s [about] where it goes… It?s not just about the company it?s about Japan,? said Woodford in an exclusive hour-long interview.
?A lot of people?s lives are affected. The actions of a small group of people have taken a corporation to this point.?
The scandal has already forced the resignation of chairman Tsuyoshi Kikukawa – quickly followed by the dismissal of vice-president Hisashi Mori after Japanese investigators discovered Olympus had disguised losses on its investment activities with funds from other sources, since the 1990s.
Woodford compared the crisis to the Enron scandal, in terms of its potentially far-reaching implications.
?This issue of corporate governance is the number one news story in Japan. It?s touching all the principles about how Japan, as a society, functions,? added Woodford who pointed to potential ramifications for large accounting companies that have worked with Olympus in the past.
?There?s a lot of questions to be asked,? said the Liverpudlian, who believes the crisis strikes at the heart of a boardroom culture of ?sycophancy and yes-men?.
Just hours after he spoke, the New York Times (NYT) reported that Japanese officials were investigating Olympus for possible links to the Japanese criminal underworld. The paper also claimed last night that the scandal involves funds totalling at least $4.9bn.
Olympus declined to comment on the NYT story when contacted by AP today but has previously denied links to crime gangs. It refuses to confirm or deny the sums involved.
Hunger for comeback
Far from being put off by the escalating crisis, Woodford is hungry to return to the company he joined 30 years ago.
He is gearing up to visit Japan next week, to help independent authorities in Tokyo probe the affairs of the 92-year-old firm.
So, if shareholders reinstate Woodford at the helm, where would this leave the camera division?
Since the controversy blew-up there has been speculation in the press that Olympus may sell off its camera business – retaining the much larger, more profitable, medical equipment arm.
?The camera business is stronger than it?s been for several years but we have to see where Olympus?s future goes,? he told AP.
?We have gone back into profit in the consumer business. I would keep it for the moment.
‘If the business continues in its current form then ?consumer? is certainly not in the area I am saying we should cut.?
Woodford hinted that he would have felt differently had he been in charge three or four years ago.
Though unwilling to make any long-term predictions, he feels that, in future, the camera side must be ?super-fit?.
Woodford, whose father was a photographer, joined Olympus KeyMed – which is based in Southend, Essex – in 1981 and worked his way up through the company.
A few years ago he consolidated Olympus?s businesses in Europe and became president of the whole corporation on 1 April this year. Finally, just over a month ago, and only ten days into his job as CEO, he was dismissed.
Mirrorless camera future
Though he sees a big future for ?high-end superzoom? compact cameras it seems that Olympus?s Pen-branded compact camera system (CSC) models have revitalised the business, and are key to the future of the camera division, giving it a platform to ?rebuild?.
?I am a great believer in product? we make world-beating cameras, wonderful lenses, sexy-styled bodies. We can do that ? that?s what I?ve learned as I?ve got closer to the camera business.?
However, he expressed frustration that Olympus did not have more resources to invest in a market that is becoming ever more competitive, and now pitching up against the likes of camera giant Nikon in the CSC arena.
The damage done to the brand?s reputation by the widening scandal has left him ?depressed and saddened?, yet he insisted Olympus is not fatally wounded.
?I wouldn?t say I would be prepared to go back and run it if I felt it was too late, would I??
Reluctant to speculate about how Olympus executed the cover-up of accounting losses, for decades, the former CEO repeated calls for ?forensic accountants? to act within weeks, if not days, to rescue the company from its ?current totally dysfunctional state?.
?To me there?s nothing wrong with Olympus, except the most senior management, that?s the weakness.?
He has called for the entire Olympus board of directors to resign, even those not directly involved in the scandal.
Before he was fired on 14 October, Woodford said he wrote six letters to the board over a month-long period. ?Not one of them [members of the board] stood up? This isn?t a rogue trader. This is a boardroom ? most of the board members were there when the transactions took place,? he asserted.
Asked about Olympus?s initial threat of legal action against him after the firm’s share price plummeted, he told AP: ?I?d have loved to have seen a court of law hearing ?you did what, you paid an unsubstantiated $687m [fee] to unknown parties and paid it through the Cayman Islands??.?
The absence of any formal lawsuit is not surprising in light of recent developments, he added.
PAGE TWO: ‘FOLLOW THE MONEY’: ECHOES OF WATERGATE
Set for heroic comeback?
Woodford conceded that it ?would be very easy to walk away? from the crisis, but he has no other plans, other than to make – what may prove to become a somewhat heroic – comeback.
Key to this goal is the firm?s 44,000 staff who he cannot praise highly enough, especially those in the UK.
Keen for Olympus to put this unsavoury affair behind it and ?move to a brighter future?, he said: ?The UK is the jewel in the crown of Olympus. There are exceptional people there and they are one of the main reasons I want to go back? and I mean that across all of our businesses.?
Woodford, who won an MBE ten years ago for funding road safety measures in Essex, accused the firm of wasting its resources on ?peripheral activity? which had nothing to do with Olympus?s core businesses, citing a company making face cream as one of a series of questionable acquisitions it made.
When the story first broke, Woodford did not expect the full extent of the dubious financial transactions to ever be fully explored.
That?s all changed. He now believes investigators in Japan, the US and the UK will get to the bottom of the crisis. ?There?s so many independent people ? this is under the eyes of the world. It?s got the world?s most astute financial journalists covering it and independent law enforcement agencies across the globe.?
Asked if he is worried about his safety when he returns to Japan next week to help investigators, he replied: ?I believe that the Japanese authorities will ensure my safety but you?d be foolish to be arrogant and not prudent about it.?
Woodford confirmed he has liaised with the UK?s Metropolitan Police about his personal security but refused to discuss details, adding: ?In a sense, what I know is out there ? it?s now for others to follow and to explore the detail. I?m not somebody who knows what they [Olympus] were doing.
?All I did was pick up on the issue of payments? There?s so much more. This is where the enforcement agencies can ?follow the money?,? acknowledging that pursuit of the money-trail has a ring of ?Watergate? about it.
Woodford said he first learned of the financial irregularities after they were exposed in a Japanese financial journal. A contact with knowledge of Olympus later confirmed his fears.
He was first alerted to the scandal on 27 July. On a visit to Olympus?s European base in Hamburg he began receiving emails warning him of the potential implications and asked a Japanese businessman he knows to help him translate the magazine article he had seen.
PAGE THREE: ?IT?S LIKE A JOHN GRISHAM NOVEL?
Scandal may reach far and wide
?I found it unbelievable frankly? it?s like a John Grisham novel this whole affair? and then if you understand all the nuances and tentacles it really is,? he claimed.
He stressed that the manner of his dismissal is ?trivial? compared to the scandal that has rocked the firm since.
Woodford, who does not speak Japanese, received news he?d been fired via a translator.
?Ten days earlier I?d been made CEO, approved by the board,? explained Woodford who had commissioned a report on the matter with accountants PriceswaterhouseCoopers.
?The night I get back to Japan I sent [the board] my report and a letter, then I?m dismissed, because I brought notice to the board in an evidential way. They wanted to close it down quickly, close me down?. Japanese companies hate anything public so what were they so scared of in such an extraordinary way??
Does he not think the directors were naïve by sacking him in the knowledge he may go public? ?I think they were desperately scared and thought they could perhaps manage it and weather it out.?
The past eight weeks have left Woodford unable to relax. The pace of the unfolding drama has been non-stop.
?I?m probably unusual in the zealot-like way I?ve gone about this, and been relentless ? appearing on TV station after TV station with my simple message: This is wrong.?
But he remains positive in the knowledge that a former director has launched a petition calling on staff to back his return to the Olympus fold. The website, he tell us, had to be temporarily taken down after it became ?overwhelmed? with visitors.
?We have to clear up this horrible governance issue, then we can move forward. Olympus could become a glowing example of what corporate governance could mean,? he insisted. ?There?s a lot of good Japanese people out there.?
Meanwhile, Woodford continues to be on call ?seven days a week?, fielding enquiries from the world?s media or liaising with investigators.
?We are flying out to New York again to meet the FBI [on 29 November]. I never imagined I?d be doing that ? I thought I was going to be running a medical and consumer electronics business??
Commenting on the ?third-party panel? inquiry that Olympus has set up to address the controversy, a Tokyo-based spokesperson for the disgraced company told AP today: ?We will fully co-operate with the investigation? and sincerely accept the report and proposals to improve our corporate governance.
?Also, we will establish a new management with support by independent experts and adopt any measures to improve our governance as quickly as we can.?
But, as each day brings fresh twists and turns, one thing seems clear. That is far from the end of a saga that led one of the world’s best known camera brands to lose most of its corporate value.