By Claire Reilly
Former CEO of Olympus Corporation, Michael Woodford, yesterday resigned from the company board after weeks of turmoil, following allegations that the company had made $687 million in payments to a mysterious third party during the 2007 acquisition of British medical company, Gyrus.
Looking over statements made by the company in relation to the fiasco, a rich tapestry of intrigue emerges, with high-profile resignations, rumours of an FBI investigation and allusions to organised crime. Here, Current takes a look at the timeline of what Woodford called “a shameful saga by any stretch of the imagination”.
1 October 2011: Olympus announces the appointment of Woodford as CEO, six months after he was appointed president. Chairman Tsuyoshi Kikukawa said he Woodford had “shown a great sensitivity and understanding of the different cultures across our global organization.” Woodford said he was inspired by Kikukawa’s “personal motto of ‘Creative Destruction’, demonstrating his willingness to challenge the established order”.
14 October: The Company dismisses Woodford, saying he had “largely diverted from the rest of the management team in regard to the management direction and method, and it is now causing problems”. Kikukawa takes the reins as president and CEO, affirming a commitment to “Japanese style management”.
17 October: Amidst press speculation, Olympus insists that its past mergers and acquisitions were “carried out under appropriate procedures and processes as well as proper accounting practices”.
19 October: Olympus says that Woodford’s earlier request for the resignation of board members was just one of the “numerous arbitrary actions taken” by the then CEO. The company also defends the $687 million in payments made to the unnamed “financial advisor” involved in its acquisition.
26 October: Tsuyoshi Kikukawa steps down as chairman, president and CEO, due in part to “the fall in stock prices” since October 14. Shuichi Takayama is named as president after 41 years at the company.
28 October: Olympus denies having been contacted by FBI investigators. (Reuters reported that Woodford was meeting FBI officials in New York just yesterday).
1 November: Olympus appoints a Third Party Committee to “investigate whether there were wrongful or otherwise improper conducts” involved in the acquisition of Gyrus.
8 November: The fatal hit. “It has been discovered that the Company had been engaging in deferring the posting of losses on investment securities, etc. since around the 1990s,” the company says in a statement. “Both the fees paid to advisors and funds used to buy back preferred stock [in relation to the acquisition] had been…used in part to resolve unrealised losses on investment securities.” In financial terms, this is known as a ‘tobashi’ scheme – a Japanese phrase meaning ‘fly away’.
Later that day, the board dismisses executive VP, Hisashi Mori, and the company’s corporate auditor, Hideo Yamada, who were both found to be “involved in such deferral in posting of the losses”.
10 November: An Olympus shareholder files legal action against 21 incumbent and former directors involved in the scandal, for their “liabilities towards the Company”. The company also announces it is unlikely to be able to file its Second Quarterly financial report by the November 14 due date, and that its stock has been listed as a “security under supervision” on the Tokyo Stock Exchange.
17 November: The company announces that it will be necessary for it to file amended financial statements for previous years.
21 November: The Third Party Committee involved in investigating Olympus denies media reports that acquisition funds “may have flowed to anti-social forces (organised crime syndicates)”.
24 November: Former executive VP Mori, former CEO Kikukawa and former auditor Yamada resign from the board.
25 November: Current CEO Shuichi Takayama issues a statement, saying “the company is facing to lose credibility in the world at once”. Once responsible directors have been called to account, he says the company must “realise a ‘new Olympus’” and that “all employees, ex-employees and affiliates…should join forces and unite to reform Olympus”. The company also issues a statement regarding a class action lawsuit being brought against Olympus in the United States, following a drop of more than 50 per cent in stock value.
1 December: Former CEO Michael Woodford resigns from the board, calling for “a new and untainted board of directors”.