organized crime

TOKYO — An outside panel appointed by Olympus to investigate its financial scandal issued a harsh report Tuesday, calling the company’s recently departed management “rotten to the core.”

The panel, led by a former Japanese Supreme Court judge, also details the roles it claims were played by three former Nomura bankers in arranging a cover-up, and it says Olympus paid the bankers for their efforts. It also criticizes Olympus’s auditors, KPMG AZSA and Ernst Young ShinNihon, for failing to expose fraud at the company.

The report says that Olympus had persuaded several banks, including Société Générale of France, to submit incomplete financial statements to auditors, apparently in an effort to conceal financial maneuvers that the report says involved at least $1.7 billion and were meant to hide failed investments during the 1990s. There is no indication the banks knew of Olympus’s cover-up, the report said.

According to the report, Olympus told the banks that they did not need to respond to KPMG queries about collateral, which was used to finance loans to investment funds involved in the loss cover-up.

“The management was rotten to the core, and infected those around it,” said the report, which ran more than 200 pages, with appendixes.

KPMG and Ernst Young denied wrongdoing Tuesday. The Tokyo branch of Société Générale said it could not comment on the contents of the Olympus report. Inquiries to the bank’s headquarters in Paris were not immediately answered.

Despite its harsh tone, the report by the Olympus-appointed panel seemed to sharply define the limits of blame and potential wrongdoing. Most significantly, the panel repeated a preliminary finding it had announced last month: that it had found no evidence of organized crime involvement in the Olympus scandal.

The possibility of organized crime involvement in the cover-up has become a crucial issue because evidence of mob links could prompt the Tokyo Stock Exchange to delist Olympus shares. Such a move could seriously damage shareholder value by making the stock difficult to sell.

Olympus’s stock rose 15 percent in Tokyo on Tuesday before the report’s release, on news reports that the panel would deny any mob involvement.

In a statement, however, the Tokyo Stock Exchange warned Tuesday that the company could still be delisted if it failed to meet a Dec. 14 deadline to submit its latest financial statement. Olympus shares have already lost half their value since the scandal began in October.

Olympus issued a statement saying it “takes very seriously the results” of the report and that it was considering “further fundamental measures to restore confidence as soon as possible.” It also said that it was committed to filing its financial statements by the Dec. 14 deadline to avoid a delisting.

Olympus appointed the panel on Nov. 1, shortly after accepting the resignation of Tsuyoshi Kikukawa over the scandal and replacing him with Shuichi Takayama, who had been a managing director.

The report took pains to blame Mr. Kikukawa and a small circle of other executives who have already left the company, and stressed that possible legal action should not extend to others at Olympus. It said the company could be salvaged, seemingly heading off speculation that it might be carved up and sold.

The report left many open questions — as even the panel’s chairman at least partly acknowledged by saying that a forensic accounting by auditors would still be necessary, as well as the completion of investigations under way by Japanese and overseas legal and regulatory authorities.

In a news conference here, Tatsuo Kainaka, the panel’s chairman and a former judge of Japan’s Supreme Court, said it was still unclear how much of Olympus’s money had been siphoned off and where it had ended up. The report said there was a “continuing outflow” of money from the company.

Hiroko Tabuchi reported from Tokyo and Keith Bradsher from Hong Kong.

Article source: http://feeds.nytimes.com/click.phdo?i=268859554921b69788eabf2a8da9de12

Anthony Rose, a company spokesman in Hong Kong, said the timing was a coincidence. Both left for personal reasons, he said, declining to elaborate.

Ed Chan, the chief executive and president of Wal-Mart China, and Clara Wong, the senior vice president for personnel at Wal-Mart China, have stepped down. Scott Price, the chief and president of Wal-Mart Asia, will temporarily assume Mr. Chan’s duties in addition to his own, while the company will name a replacement for Ms. Wong in coming days, Mr. Rose said.

In addition to the closings, the municipal government of Chongqing ordered Wal-Mart on Oct. 10 to pay $420,000. The penalties were in response to what the city government described as the mislabeling of pork as organic.

Wal-Mart issued an apology then for inconveniencing its customers because of the closing of stores. The company also said it was working with local officials to improve its operations in Chongqing, which employ 3,000 of the company’s nearly 100,000 employees in China.

The penalty for mislabeling pork was the latest of 21 punishments for Wal-Mart in Chongqing since 2006. The unusual series of penalties, in a country where enforcement of food labeling and handling laws is often weak, has prompted a debate on the Internet in China and among foreign executives over why Wal-Mart has so many troubles.

Chongqing has a reputation for being fiercely nationalistic, but also quick to crack down on organized crime and other illegal activity. So the debate has revolved around whether Wal-Mart has had consistently bad management in Chongqing or whether it is a victim of either populist nationalism or of local retailers allied with officials who dislike competition from a multinational.

Article source: http://www.nytimes.com/2011/10/17/business/two-wal-mart-china-executives-resign-posts.html?partner=rss&emc=rss

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