The "yes men" at Olympus Corp. (TYO:7733) who permitted a decade-long scheme to hide billions in losses should all be fired, according to an independent panel’s probe of the affair.
Three former chairmen a trio of erstwhile aides were "rotten to the core," according to the panel’s report, which advocates that others "involved in the fraudulent accounting one way or the other, and auditors who did nothing when the auditing firm pointed out the issues should be fully eliminated."
Olympus has admitted to using mergers and acquisitions to conceal billions of dollars of investment losses. In one case the company shelled out $687 million in fees to dummy consulting firms.
"The entire board should be changed as they all share the blame," Japanese investment banker Mitsushige Akino told Reuters. "The managers may have been foul, but Olympus’s main business is good. If the board changes, it’s still possible for the company’s shares to regain this year’s highs."
Olympus shares were up 9 percent at the close of business in Tokyo yesterday; its U.S. ADR shares had gained 3.3 percent as of about 2:30 p.m. today on Wall Street, trading at $14.25.
The stock has lost more than half of its value since Oct. 14, when then-CEO Michael Woodford was ousted after threatening to go public about the scheme. Woodford is now spearheading a move to wrest control of the endoscopy giant from its current board of directors.
The panel’s report, released yesterday, details a web of offshore entities in the Cayman Islands and British Virgin Islands to hide the investment losses, channeling money through the dummy fronts to help the scheme succeed, according to the news service. Looking to offset operational profit hits from the strong yen in the mid-1980s, Olympus began making financial investments. But when the Japanese bubble popped in 1989, it snapped up high-risk bonds in a scramble to recoup its losses.
The report points the finger at former presidents Masatoshi Kishimoto and Tsuyoshi Kikukawa as involved in the cover-up, along with a former executive vice president named Hisashi Mori and auditor Hideo Yamada, according to Reuters.
A trio of European banks played a role, according to the Wall Street Journal, by furnishing incomplete financial statements to Olympus’ external auditor, KPMG AZSA LLC. The report also fingers LGT Group of Liechtenstein, the Singapore branches of Commerzbank AG of Germany and Société Générale SA of France.
Yamada ordered colleagues “to tell the financial institutions that they didn’t need to respond to inquiries about collateral when the auditing firm asked about balances,” according to the newspaper.