Spring showdown looms for Olympus

In one of Japan’s largest accounting scandals, Olympus, the manufacturer of digital cameras and medical endoscopes, admitted hiding more than Y100bn in investment-related losses dating back to the 1990s.

Since the affair came to light in October, the 92-year-old company’s share price has fallen by as much as 80 per cent, four executives accused of orchestrating the deception have lost their jobs and law enforcement agencies in Japan, the US and the UK have launched investigations.

Olympus avoided automatic delisting from the Tokyo Stock Exchange after meeting a December 14 deadline to restate its accounts with just two hours to spare. However, it could still be delisted if the TSE, which is conducting a separate inquiry, decides that the accounting deception had a material effect on shareholders.

Japanese prosecutors also raided Olympus’s Tokyo offices and the executives’ homes on December 21 in a sign that arrests may be imminent.

The scandal emerged thanks to a high-ranking whistleblower: Michael Woodford, Olympus’s British chief executive, who was fired by the company on October 14 after less than seven months on the job.

In the weeks before his dismissal, Mr Woodford had confronted other executives about a series of suspicious acquisitions made by the company before he took over – deals that turned out to have been used as cover to dispose of the long-hidden losses.

Mr Woodford, a 30-year veteran of Olympus’s European operations, took his concerns public the day he was fired, initially in an interview with the Financial Times. He is campaigning to regain his post and remove Olympus’s remaining directors, and a showdown looms at an extraordinary shareholders’ meeting planned for March or April.

It remains unclear exactly how Olympus dug itself into a hole in the first place, but many Japanese groups lost money on speculative stock and real estate investments when the country’s asset bubble burst at the start of the 1990s. Until accounting rules were tightened in 2000, hiding those losses was common enough to merit its own financial slang: tobashi – to make fly away.

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