Exposing one of the biggest and longest-running loss-hiding arrangements in Japanese corporate history, Olympus Corporation confessed today that it had been covering up investment losses for decades, falsifying documents to cover its tracks.
After weeks of denying the allegations, the 92-year-old camera maker, of such recently introduced products as the Olympus E-PM1, finally admitted to a series of mysterious deals, involving billions of dollars in payouts, which have been the subject of recent controversy. Previously, Olympus explained the payouts as advisory fees and payments for share purchase in small venture firms.
The admission comes after company investors and former CEO Michael Woodford raised concerns over the deals, forcing an inquiry to take place. The internal investigation revealed an arrangement whereby the company had covered up losses on investments from as early as the 1990s. Olympus effectively wrote off the paper losses on those investments by funneling money through funds used to conduct the controversial deals. Such deals include the buy-out of Gyrus Group PLC, a U.K. medical-technology firm, and the purchases of three small Japanese firms, according to Olympus.
At the press conference, Olympus president, Shuichi Takayama, claimed that the company hadn't yet determined the size of the losses, though made a point to clarify that there was no erosion on the value of its core business. Mr. Takayama went on to blame three Olympus executives for the cover-up scheme, declaring he knew nothing of such frauds until yesterday. The three executives - chairman Tsuyoshi Kikukawa, vice president Hisashi Mori and corporate auditor Hideo Yamada-have since been fired or resigned from their posts.
Besides facing great shame in a country where dishonor is looked down upon, Olympus may also be put on the watch list for possible delisting from the Tokyo Stock Exchange. Depending on the scale of the scheme, the company could be removed from trading for falsifying reports, according to a report from the Wall Street Journal.