Olympus CEO Called In Forensic Accountants – 4th January 2013

The first CEO to turn whistleblower, Michael Woodford, last month published a book on how he eventually called in forensic accountants to get to the bottom of the fraud that threatened his livelihood, health and even at one stage, his life. Mr Woodford recalls in Exposure: Inside the Olympus Scandal: How I Went from CEO to Whistleblower, how he found out in 2011, through an article in a Japanese magazine, that something was wrong shortly after he was appointed as CEO.

The article revealed that Olympus had bought three tiny, profitless companies in 2008 for $800m, only to write down three-quarters of their value by the end of the financial year. Then the company gave nearly $700m in “advisory fees” to an entity in the Cayman Islands whose ownership and legal standing were unclear. When Mr Woodford learned of this, he sought answers from the firm’s chairman, Tsuyoshi Kikukawa but to no avail and was met with a wall of silence from the Japanese hierarchy and rest of the board.

Determined to find out the extent of what by then he strongly suspected to be fraud, Woodford sought the help of forensic accountants, who painstakingly followed a trail that went even further back than 2008. They found that the scandal centred on an accounting fraud designed to conceal losses on financial instruments amounting to the equivalent of $1.1 billion.

Initially there were suspicions of the involvement of the Japanese mafia, the Yakuza, but it turned out that it was not the mob but managers, who tried to use accounting write-offs to cover up investment losses dating back from the 1990s that would have gone undetected had it not been for the investigation ordered by Mr Woodford.

Author: Roger Isaacs, 04th January 2013

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