British president and CEO of Olympus Corp. sacked after unearthing suspicious accounting
Just over six months since being promoted to the role of president at Olympus Corp., and barely two weeks since being awarded the additional role of CEO, Brit, Michael Woodford, 51, a veteran of 30 years at Olympus' medical imaging division in Europe, was unceremoniously sacked at the end of last week during a hastily arranged board meeting in Tokyo after Woodford alleged large scale accounting irregularities he discovered within the company. Woodford had, himself, requested the resignation of the company chairman (who had originally promoted Woodford to company president) and the company vice president.
Olympus is best known for its camera business, which has been struggling in recent years, but the most profitable core Olympus business is in lucrative medical imaging. The furore that has erupted over the board room fireworks in Tokyo is, unfortunately, likely to negatively affect the camera division even though the allegations are focused on medical imaging and other businesses within the Olympus portfolio.
Woodford says he discovered unexplained losses to the company and its shareholders to the tune of over $600M, involving incredibly high fees paid to advisers involved in Olympus acquisition of a large medical equipment company in the and also three small companies whose businesses were nothing to do with Olympus core operations. Woodford alleges much of the fees were paid to companies based in tax havens that have since disappeared. He backs up his allegations with evidence in the form of a financial audit by PricewaterhouseCoopers (PwC) he commissioned after reading an article in a Japanese magazine that questioned some inexplicable investments made by Olympus over the last few years.
Olympus' response has been rather vague and insubstantial, citing a difference in management and cultural styles between the company and Michael Woodford, despite glowing tributes concerning his work to date and additional promotion to CEO just prior to his sacking. In its most recent reaction to the situation Olympus has hinted it may take legal action against Woodford for publicising confidential company information. In return, during an interview with the Financial Times, Woodford said he welcomed such a move as it would help to bring out in to the open the whole story regarding the accounting irregularities he uncovered. Woodford has since invited the Serious Fraud Office in London to investigate his allegations as the Olympus company that made much of the payments to mysterious advisor companies is UK-based.
Olympus' reputation and financial stability is under severe pressure because of the unfolding scandal. These problems come at a time when Olympus has at last shown some positive developments in its camera business with the successful launch of three new Compact System Cameras in its Pen range. The camera division desperately needs continued investment to underpin its recovery. But the Olympus Corp. share price has been hammered since last Friday.
Without doubt, this story has plenty of steam left in it.
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