In an extraordinary diatribe distributed to staff of Olympus, the Japanese optical equipment manufacturer, on Tuesday, the group’s chairman denounced its ousted British president and chief executive for – among numerous other things – being something of a control freak.

Michael Woodford, fired by Olympus on October 14, had as head of its European business even tried to keep direct authority over stationery purchases, complained Tsuyoshi Kikukawa.

“It seems he became uneasy if there was even ¥1 he could not account for,” Mr Kikukawa wrote in a lengthy memo posted on the internal company website. “It’s a good attitude to ‘pay attention to the detail’, but Olympus is an enterprise with consolidated sales of over ¥800bn.”

The problem for Mr Kikukawa, not to mention Olympus shareholders, is that the issues Mr Woodford believes led to his firing involve an awful lot more than ¥1.

The Olympus veteran, who was appointed president in February and promoted to chief executive two weeks before being fired, says the split with Mr Kikukawa came after he questioned deals between 2006 and 2008 that he reckons destroyed $1.3bn of shareholder value. That is not chump change. But investors hoping for an explanation have so far been disappointed. Olympus continues to insist that the main reason for sacking Mr Woodford was his failure to conform to Japanese business culture.

Tellingly, Mr Kikukawa’s memo – his first detailed account of the circumstances of Mr Woodford’s sacking – was addressed to colleagues, not shareholders. The chairman had previously told the Nikkei Shimbun, Japan’s leading business daily, that Olympus had paid a mysterious financial adviser in one 2008 acquisition about ¥30bn – half the amount alleged by Mr Woodford – only for the company to later admit grudgingly that the ousted chief executive’s figure was correct.

But instead of further explanation of the deals, Mr Kikukawa’s harshly worded memo was an exercise in what might be called ad hominem ad nauseam. The chairman sought to turn the focus back to his former protégé’s alleged failings, which he said also included poor temper control, lack of respect for reporting lines and overly indulgent use of private jets.

Mr Kikukawa did insist he had “nothing whatsoever to be guilty about” and at least acknowledged his account would still leave his colleagues with plenty of questions. But in a cliffhanger sign-off worthy of a weekly manga comic, he declared that an explanation would have to wait until the next instalment.

This is clearly not good enough. The US Federal Bureau of Investigation is already probing Olympus’s 2008 acquisition of Gyrus, the UK medical equipment company. Pressure is growing on Japanese regulators to follow suit and to look into its decision to spend more than ¥70bn to buy three little-known companies with no connection to its core businesses that were quickly shown to have little value.

Nor is Olympus’s promise to set up a third party committee to investigate the deals likely to reassure anybody. Just this month, for example, utility Kyushu Electric Power simply waved aside the results of a similar probe into its attempts to manipulate public opinion in favour of restarting nuclear power reactors.

Indeed, Mr Kikukawa’s position now appears untenable. Supposing you accept his own account, he promoted a protégé totally unsuited to lead the company. Even if all payments were entirely legitimate, he authorised deals that were clearly poor investments. When the payments were revealed, he obfuscated rather than explained. Mr Kikukawa should resign.

Yet the Olympus scandal is now much bigger than one person. The company’s failure to clarify who it paid such large sums to has led to inevitable speculation that darker forces are involved. Mr Woodford has stressed he has seen no evidence of any criminal involvement in the deals, but even the possibility worried him enough to make him leave Japan in haste after his sacking.

Nor are such fears absurd. Japan’s yakuza organised crime syndicates have about 80,000 known members and their influence extends beyond core activities such as gambling and prostitution into legitimate business. A standard tactic for yakuza and their associates is to find ways to persuade companies to overpay for goods or services, whether humble bento lunch boxes or more substantial assets.

Failure to secure a full accounting of the Olympus deals risks casting a shadow over all Japanese businesses. By contrast, a full investigation will demonstrate the nation’s ability to enforce good governance. It might even boost prices in an equity market that is by some measures undervalued. For Olympus shareholders, with the worth of their holdings down by half since Mr Woodford was fired, that would be good news indeed.

Mure Dickie is the Financial Times’s Tokyo Bureau Chief

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