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Ex-Chief Executive of Olympus Ties Ouster to His Claim of Fraud by the Company...   >>>

Ex-Chief Executive of Olympus Ties Ouster to His Claim of Fraud by the Company

By HIROKO TABUCHI, NEW YORK TIMES

Published: October 17, 2011



TOKYO — The British executive who was publicly pilloried as a bad manager when the Japanese company Olympus fired him on Friday, struck back on Monday, saying he was forced out because he was about to expose potential financial fraud at the company.



The executive, Michael C. Woodford, on Monday delivered a dossier of what he called “condemning” evidence on Olympus to Britain’s Serious Fraud Office in London.



Mr. Woodford, 51, said he had confronted the Olympus chairman, Tsuyoshi Kikukawa, in Tokyo last week with a report he had commissioned from the accounting firm PricewaterhouseCoopers.



The report, he said, raised questions about almost $700 million Olympus had paid to financial advisers over the acquisition of a British medical technology company in 2008.



The PricewaterhouseCoopers report says that improper conduct could not be ruled out.



Mr. Woodford said that he had demanded Mr. Kikukawa’s resignation, only to have the chairman convene a board meeting in Tokyo on Friday in which Mr. Woodford, the only non-Japanese executive among the 15 directors, was fired. Mr. Woodford said the entire board had known about the PricewaterhouseCoopers report but had not taken action.



“Olympus needs a complete and utter forensics accounting,” Mr. Woodford said Monday during a telephone interview from London. “I’d be delighted to return and put in a new management structure,” he said. “But with or without me, the board should all go.”



Olympus denied any wrongdoing and declined to make Mr. Kikukawa available for an interview.



Mr. Woodford, a 30-year Olympus veteran, had been president since April and had been given the chief executive’s post only in September.



Separate from the transaction covered in the PricewaterhouseCoopers report, Mr. Woodford said he had also made inquiries into Olympus’s acquisition in 2008 of three small Japanese companies unrelated to Olympus’s core businesses for almost $600 million. Those investments, which were not covered in the accounting firm’s report, were written down to only a quarter of their value within the same fiscal year, he said.



In all, Mr. Woodford said, the transactions he is questioning resulted in the destruction of $1.3 billion in shareholder value at Olympus, a maker of cameras and medical equipment. The transactions, he said, occurred under Mr. Kikukawa, who preceded him as chief executive before becoming chairman.



“To be that incompetent is difficult to imagine, which suggests that there is something more sinister going on,” Mr. Woodford said.



Yoshiaki Yamada, a spokesman in Tokyo for Olympus, maintained Monday that Mr. Woodford had been stripped of his title because his leadership style had created “a big gap” with the rest of management, which was “inhibiting decision-making.”



“All of our mergers and acquisitions have been carried out with proper accounting, and through appropriate procedures and processes,” Mr. Yamada said.



He could not confirm a report, by Reuters, that Olympus was considering legal action against Mr. Woodford for disclosing confidential company information to the news media. Mr. Woodford’s allegations were first reported by The Financial Times.



Since Mr. Woodford’s dismissal on Friday, Olympus has lost more than $3 billion in market capitalization. The stock sank 22 percent in Tokyo on Monday after losing 18 percent on Friday, when the company fired Mr. Woodford.



Mr. Woodford said the transactions first came to his attention in late July, when an article in the Japanese finance magazine Facta raised questions about Olympus’s acquisition of the three Japanese companies. But when Mr. Woodford asked Mr. Kikukawa about the article over lunch in early August, he said the chairman told him it was “a domestic situation” that the Briton need not worry about.



Two weeks ago, Mr. Woodford said he commissioned PricewaterhouseCoopers to examine the 2008 purchase of the British medical technology firm, Gyrus. Mr. Woodford said he sent a copy of the accounting firm’s report to Mr. Kikukawa last week, along with a letter in which Mr. Woodford called the transactions “shameful” and called for the resignations of the chairman and two other executives.



He said he also sent the report to all members of the Olympus board and suggested to Mr. Kikukawa that they meet Friday to discuss “where we go from here.”



But on Friday morning, Mr. Kikukawa held an emergency board meeting, where Mr. Woodford said he was not allowed to speak. See The New York Times for more....