FBI Probes Scandal Uncovered By Olympus CEO

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Steve Inskeep talks with Jonathan Soble of the Financial Times about a scandal that has engulfed the Japanese camera and medical device maker Olympus. Ex-CEO Michael Woodford, a rare non-Japanese CEO, was ousted after he brought into the open massive and possibly improper payments that Olympus paid to two little-known "advisory firms" as part of an acquisition several years ago. The FBI is now investigating.


Another great Japanese brand name is now associated with scandal. Olympus is famous for its cameras. It actually makes more money from medical devices.


A few years ago it acquired a company in the medical industry, and afterward a new CEO arrived and discovered that someone seemed to have made unusual profits from that deal.

MONTAGNE: More than $700 million went to little-known advisers with accounts in the Cayman Islands. The CEO who exposed the problem was not rewarded. In fact, the board fired him.

INSKEEP: That executive, a British man named Michael Woodford, soon left Japan, but on his way out of the country, he told his story to a Financial Times reporter. Later, that reporter, Jonathan Soble, spoke with us.

JONATHAN SOBLE: We eventually met in a cafe but he showed up with a sheaf of documents that support his case — showed monies moving from Olympus to accounts in the Cayman Islands. They showed the record of board decisions that were never made public about these payments, also included a report from PWC, the auditing firm, who he brought in at the very end, just before he was fired, to try and get some clarity. They couldn't trace the people who received Olympus' money. So he thought this was all very fishy, and he wanted us to have the story, so that was how we got it.

INSKEEP: So he handed you these documents, then left the country, leaving you, I guess, to call up Olympus and ask them what they made of all this.

SOBLE: That's right. Olympus had announced the firing, and they held a press conference that day and they said that they had fired him because he had been unable to come to terms with Japan's unique management style. They had brought in a foreign manager, he was the first foreign manager in the company's 92-year history, and they said that he wasn't following protocol. He was annoying his colleagues by going over their heads, by issuing orders to employees without going through proper channels. They essentially made it out to be an issue of culture, a culture clash.

INSKEEP: Well, I wonder if we could actually take that statement literally and ask the question this way: Is it actually part of Japan's unique management style that large amounts of money would just disappear in the course of a corporate acquisition?


SOBLE: It's not part of the way that most Japanese companies do business, certainly not at this scale. But certainly, there was more going on here than the culture clash that Olympus was claiming.

INSKEEP: This CEO, Michael Woodford, was British and was accused on his way out the door of not understanding the Japanese business culture. Is it possible that on some level he actually just didn't — that something complicated went on here but he didn't quite get it or didn't quite get how to go about finding the answers?

SOBLE: I think it's possible that what he did he did in part because he was coming at it with the eyes of an outsider, because he was a 30-year Olympus employee but he worked his entire career in Europe. But if he had come up in Japan as part of the inner circle, he may have bought into the kind of pact of silence that was obviously going on inside. So as an outsider, it was easier for him to go public. So on that level there is something cultural going on, certainly.

INSKEEP: Has Olympus said anything concrete about the allegations that Mr. Woodford has made?

SOBLE: It has defended its payments and said it hasn't done anything illegal. But it took them a few days even to admit that it had paid the money. Eventually, it did say, yes, we paid this money to the adviser in the deal. It also admitted to the size of the acquisitions in Japan that had first drawn Mr. Woodford's attention. But it said they had been reviewed by lawyers and auditors and everything was legitimate. The problem is that it doesn't explain why the payments were so large in the first place - other than to issue a kind of blanket defense.

INSKEEP: Isn't the FBI involved in this case now?

SOBLE: Yeah, the broker was registered in the U.S. and some of the money went through American accounts, so the FBI's involved. They've spoken to Mr. Woodford and are apparently looking into the listed representatives of this brokerage, which has since shut down. We don't know how far they've gotten in the investigation at this point, though.

INSKEEP: Jonathan Soble is a reporter for the Financial Times in Tokyo. Thanks very much.

SOBLE: You're welcome.

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