Ousted Olympus Chief Accuses the Company of Fraud

The executive, Michael Woodford, was in London on Monday where he delivered a dossier of what he called “condemning” evidence on Olympus to Britain’s Serious Fraud Office.

Mr. Woodford, 51, said he confronted the Olympus chairman, Tsuyoshi Kikukawa, last week with a report he had commissioned from the accounting firm PriceWaterhouseCoopers, which he said raised questions about almost $700 million in payments that Olympus had made to financial advisers over an acquisition in 2008.

The PriceWaterhouseCoopers report says that improper conduct could not be ruled out. Mr. Woodford said that he had demanded Mr. Kikukawa’s resignation, only to have the chairman convene a board meeting on Friday in which Mr. Woodford, the only non-Japanese executive among the 15 directors, was fired.

“I’d be delighted to return and put in a new management structure,” Mr. Woodford said Monday during a telephone interview from London. “But with or without me, the board should all go.”

Olympus denied any wrongdoing and declined to make Mr. Kikukawa available for an interview.

Mr. Woodford, a 30-year Olympus veteran, had been president since April and added the chief executive’s post in September.

He said he had also made enquiries into Olympus’s acquisition in 2008 of three small Japanese companies unrelated to Olympus’s core businesses for almost $600 million. Those investments were written down to only a quarter of their value within the same fiscal year, he said.

In all, the transactions he is questioning resulted in the destruction of $1.3 billion in shareholder value at Olympus, a maker of cameras and medical equipment, Mr. Woodford said. The transactions, he said, occurred under Mr. Kikukawa, who preceded him as chief executive before becoming chairman.

“Olympus needs a complete and utter forensic accounting,” Mr. Woodford said. “To be that incompetent is difficult to imagine, which suggests that there is something more sinister going on.”

Yoshiaki Yamada, a spokesman in Tokyo for Olympus, maintained Monday that Mr. Woodford had been stripped of his title because his leadership style had created “a big gap” with the rest of management, which was “inhibiting decision-making.”

“All of our mergers and acquisitions have been carried out with proper accounting, and through appropriate procedures and processes,” Mr. Yamada said.

Mr. Woodford’s allegations were first reported by the Financial Times.

Since Mr. Woodford’s dismissal on Friday, Olympus has lost more than $3 billion in market capitalization. The stock sank 22 percent in Tokyo on Monday after losing 18 percent on Friday, when the company fired Mr. Woodford.

Mr. Woodford said the transactions first came to his attention in late July, when an article in the Japanese finance magazine Facta raised questions about Olympus’s acquisition of the three Japanese companies. But when Mr. Woodford asked Mr. Kikukawa about the article over lunch in early August, he said the chairman told him it was “a domestic situation” that the Briton need not worry about.

Mr. Woodford said he sent a copy of the PriceWaterhouseCoopers report to Mr. Kikukawa last week, along with a letter in which Mr. Woodford called the transactions “shameful” and called for the resignations of the chairman and two other executives. He said he also sent the report to all members of the Olympus board and suggested to Mr. Kikukawa that they meet Friday to discuss “where we go from here.”

Article source: http://www.nytimes.com/2011/10/18/business/global/ousted-olympus-chief-accuses-the-company-of-fraud.html?partner=rss&emc=rss