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Olympus admits covering up losses

Olympus has admitted using acquisition fees to conceal losses going back two decades. Last month the company fired its chief executive for seeking to investigate the deals.

Olympus wrongdoing 11 8 2011Enlarge
Olympus president Shuichi Takayama bows in apology during a press conference to acknowledge that the company used takeover fees to hide its losses. (Yoshikazu Tsuno/AFP/Getty Images)

It is the first time Olympus has admitted to any wrongdoing, after weeks of defending its accounts.

The admission exposed what the Wall Street Journal described as "one of the biggest and longest-running loss-hiding arrangement in Japanese corporate history."

"Since the 1990s, our company has been putting off booking losses on securities investments," Olympus announced at a press conference Tuesday.

The company made at least four acquisitions in a bid to keep losses off its books, said the Washington Post, including three Japanese start-ups that had little to do with Olympus' core business. As part of those deals, billions of dollars were paid out in the guise of "advisory fees" to financial firms and offshore funds.

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Three directors have been named as the orchestrators of the scheme, according to the Financial Times: deputy president Hisashi Mori, who was fired Tuesday; auditor Hideo Yamada, who resigned, and chairman Tsuyoshi Kikukawa, who stepped down last month.

Company president Shuichi Takayama was "absolutely unaware" of the cover-up until Mori confessed Monday, he said.

Suspicions were first raised when former chief executive Michael Woodford began asking questions about inexplicably high payouts connected to Olympus acquisitions, the BBC explains. He was fired on October 14, and subsequently went public with his concerns.

Olympus repeatedly denied any wrongdoing.

Authorities in Japan, the UK and the US are currently investigating.

The announcement sent Olympus' shares plunging to their lowest level since 1995. They dropped 29% to ¥734 ($9.40) on the Tokyo Stock Exchange Tuesday morning.

Olympus has lost more than half its market value since the scandal first came to light in October.

http://www.globalpost.com/dispatch/news/regions/asia-pacific/japan/111108/olympus-admits-covering-losses