Olympus discloses $687 mil advisory fee amid row over CEO's ouster

“differences in management style”

Love this Japanese euphemism meaning "how dare he expose our corruption and ignorance"

And people wonder why the Occupy Wall Street movement got started. This sort of corruption is like everyday.

well,all these things have been known for a long time. and, in recent months, the issues of Gyrus/others have been taken up repeatedly by magazines such as the very influential monthly Facta. (so, i was really surprised when Goldman Sachs announced several days ago that the share price of Olympus should rise to around 4,000 yen by next year. either extremely stupid or dirty.) actually,　at the biginning of this year, Japanese observers had suspected that the kikukawa regime would not be able to last for more than a few months amid the growing, extremely harsh criticism from both within/outside the company, with regard to the Gyrus affairs . then abruply Mr.Kikukawa announced the appointment of Mr.Woodford (ex-salesman who cannot communicate in Japanese), causing the media sensation. That's why the Facta editor called the appointment as cheap "目くらまし" attempt to deflect the attention from these serious issues and prolong his reign. I have felt from the very beginning that the ridiculous promotion of this British ex-salesman to the post of president and equally ridiculous firing of him this week are all related to Olympus's disastrous purchases of the UK-based Gyrus/others.

What's really an eye opener to me is the $687 miilion fee for a $1.92 billion deal. Totally off the charts.

So the preferred shares were given to the advisor in the first place, at great cost to Olympus, and then bought back again at a large multiple of the original amount. As well as looking like a piece of flagrant trickery, that also puts the advisor in the position of collecting fees for advising on a sale of an entity it had a large ownership stake in. That is against the UK rules and is one of the reasons Woodford had for alerting the authorities there.

So it seems the corrupt Japanese board didn't like there wrong doings being investigated. At least one positive has come out of the demotion, and that is the dirty mess has been exposed. The only difference, the Japanese will bow say sorry and move on

he created management confusion

I think the 'management confusion' was created long ago. He was just trying to clarify things (that still have no answers).

A $687 million fee? Way over the top, utterly outrageous.

Here's the internal letter he allowed the New York Times to post. It just goes on and on...incredibly shocking. Hundreds of millions of payments to a Cayman Island account with yet-unknown owner. That's the part I'm waiting to see...who is the person who got the money?

http://graphics8.nytimes.com/packages/pdf/business/20111018/letter-text.pdf

It did not release the name of the advisory firm.

I wonder who owns, controls and benefits from the HUGE fees paid to the 'unnamed' advisory firm? Wouldn't surprise me if the old geezers set up the advisory firm as a shell company in order to receive HUGE fees. Then they got concerned when Mr Woodford rightfully started asking questions. Hence the ridiculous statement

"differences in management style" as a reason for demoting him...

BTW - This should be in the CRIME section. It seems clear to me that corporate CRIME has been committed and they are desperately trying to cover it up...

questioning shady deals = differences in mangement style. a new definition for the next dictionary.

Wow! plus $289 million for a plastic recycling business and about the same again for a cosmetic company that uses mushroom bacteria and flogs it door to door.

Might I suggest that Tsuyoshi Kun has been lining his pockets through kickbacks. Or he is insane.

when it reaches a penny stock, maybe, the board will resign including its chairman. Shouldn't stop international legal action given the London complaint.

Olympus has threatened legal action against Woodford and has repeatedly blamed his demotion on “a big gap” between him and other directors on management and strategy, instead of his concerns over the deals.

And what legal action would that be? Nothing he has said has been proven to be a lie. If anything, the company situation is much worse than Woodward might have thought. If anyone can be suing, it would be him for wrongful dismissal.

I personally am loving. These old geezers have ruined Japan. THEY are the ones that sit around in the office doing nothing while making huge salaries and demanding that the young guys work their guts out. Get rid of them, use this money to lower costs for the customer, pay higher salaries for the new guys and.... hire more to spread the work around and change the work ethic.

Off to jail is where Kikukawa should be going.

He was ousted because he said that Kikukawa and some other board members should resign for their negligence and possible criminal activities with these M&As.

@tmarie

Olympus has threatened legal action against Woodford and has repeatedly blamed his demotion on “a big gap” between him and other directors on management and strategy, instead of his concerns over the deals.

And what legal action would that be? Nothing he has said has been proven to be a lie. If anything, the company situation is much worse than Woodward might have thought. If anyone can be suing, it would be him for wrongful dismissal.

I personally am loving. These old geezers have ruined Japan. THEY are the ones that sit around in the office doing nothing while making huge salaries and demanding that the young guys work their guts out. Get rid of them, use this money to lower costs for the customer, pay higher salaries for the new guys and.... hire more to spread the work around and change the work ethic.

Off to jail is where Kikukawa should be going.

Agree with you there. These old grease headed men should be all banned from having any management position in this country, they are ruining our country more and more everyday, STEALING money and getting fat and richer. Corruption have become one of our cultural traits it seems to me, Corruption, deception, incompetence, lies!! I would have all these disgusting corrupted old men culled if you ask me. Their lives are not worth it. They are sinking Japan into the sea by the minute, We are in enough trouble as it is. These OLD men are parasites. Enough of corrupted old people in power positions! Enough of these scum. I'm sick and tired of OLD people running and ruining this country. I can wait to see them all dead already. It's time for them to GO!!!

I think the bad should be done away with. They do indeed steal from the companies they work for - their fat salaries, the bribes... add into that, they'll also be using the heath care system for the cancer they have with all their smoking... Kikukawa needs to be behind bars. He can share a cell with Ozawa!`

There is most probably some organized crime link in the whole mess somewhere. It always irritates me when people say, "oh, the Yakuza aren't so bad.... they give to charity and help their neighbourhoods" They ARE so bad, and cases like this may prove it.

It is a serious carpet bombing by Woodward if his allegations prove true. Moral of the story: don't let the gaijin see your company secrets unless you are planning on keeping him for a LONG time.

Rarara, Why do you keep posting the same message, and keep referring to the appointment of Woodford as president as 'ridiculous'? It was the best thing the company has done recently, and he performed his duties spectacularly well by exposing this whole problem. 'Can of worms' doesn't begin to do it justice. Woodford himself clearly identified Facta as his source which alerted him to this problem. And he also mentioned that Facta must have been receiving information from some as-yet-unknown whistleblower. So Woodford ordered the PwC report and laid all the facts before Kikukawa and the rest of the board. Yes they would have already been aware of the article(s), and some of them were clearly aware of (actually responsible for) the true story behind it, but Woodford was placing it on the record, and making sure that all of the board as well as the company's auditors and lawyers were apprised of the facts. Woodford is the absolute hero of this whole sorry tale.

Is news biased as one critical info is missing which is:

A large part of the PWC report focused on the fees paid to Olympus's financial advisers on the Gyrus deal. The report identified them as Axam Investments Ltd., which is incorporated in the Cayman Islands, and Axes America LLC, which is incorporated in New York. Mr. Woodford said he was unable to contact those companies. The Journal was unable to find contact information for them. The significant size of the payments, and the fact that PwC auditors had been unable to trace their recipients after Mr Woodford hired the professional services firm to investigate, suggess the involvement of “sinister” forces.

This info was reported in other news papers than why not in Japan today?

Rob

badmigraine, thanks for the link. Truly shocking stuff, but I commend Michael for his actions.

JapanGal:

he exposed the companies wrong doings

as i wrote earlier, all of these problems had been already reported over the past 12 months or so by some infuential sectors of the Japanese media such as the monthly Facta. At the time when Mr Kikukawa announced the ridiculous promotion of this British ex-salesman as his "successor", he was under really intensifying pressures to expose everything and leave the company IMMEDIATELY together with many of the board directors. that's why the Facta editor called the much publicised/applauded promotion of Mr,Woodford as cheap "目くらまし" attempt to deflect the attention from these serious issues and prolong his reign.

No. The moral of the story is conduct your life with honor and dignity...

Someone is skimming money, to sell the shares then buy them back at a high price means someone made a ton of money on the side. It is fraud at the minimum, this chairman needs to booted, the directors are just a bunch of yes men in a shogan style company.

The report took a week to prepare and was produced by PwC, purposely brought in as independent professionals. Woodford himself would not have needed to spend significant time on it. It probably was paid for by Olympus, but I don't think too many shareholders are going to have a problem with a report costing perhaps $10,000 when there is the little matter of the missing $1.3bn occupying people's minds. Woodford opposed the acquisition of the British company on cost grounds, not knowing at the time about the dodgy fees. He also opposed the acquisition of the three Japanese companies (which all have the same address listed, by the way, in an interesting 'coincidence') on business grounds. But he was not privy to the details of the deals due to his more lowly status at the time. He reported to the UK authorities because UK rules appear to have been breached. Due to language and other considerations it may have been easier for him to focus on that first, while also pointing up the problematic Japanese transactions in a way that should ensure they also get looked into.

HOW much? Wht the.... shareholders will be bubbling a little to say the least WITH RAGE. As for the Brit, well done, these Japanese men won't like having it getting breezy behind them.

Michael Woodford

Lasted less then the average PM in Japan.

I am glad he exposed the companies wrong doings.

Sounds like the yakuza are involved in this one.... Destroying Japan is what the mafia does....their partners in crime are weak old school thinkers. Who is killing Japan?

In Japan they say that when you see one gokiburi (cockroach) there are 30 more that you haven't spotted yet.

I'd be willing to bet that industry and government is rife with this kind of graft.

Kudos to this guy for blowing it open.

Not only in Japan, EVERYWHERE.

Even in the completely incorruptible and honest U.S.A.

Wikileaks, we need you!

Hands in the cookie jar!

"So the preferred shares were given to the advisor in the first place, at great cost to Olympus, and then bought back again at a large multiple of the original amount."

theeastisred: This is a very common type of corruption. An example: A politician sells a house/property to someone at a absurd low price and than they or someone else buys it back at an absurd high price.

eeeeeeeee....3 companies with same address. Coincidence? No. It looks like well planned or common modus operandi of Japanese directors to make money. Just wondering isnt that the aquisition of one company instead of 3 companies? I am scratching my head thinking where has all the money gone....I hope its not hidden under bed of Kikuwa or perhaps need to check the personal bank accounts of top guys.

Olympus guys ...please think little about the young guys who lost their jobs in earthquake affected areas. Please give them work at Olympus instead of paying so high fees to advisors..Have shame and respect Michael for having balls to bring this to public. Thats first step to embrace change.

Rob

Selling preference shares cheap then buying them back again would have been bad enough, but in fact they were not sold in the first place, but rather given to the advisor with Olympus footing the bill (as per article). So it is even worse than the politician and the house! The advisory companies, by the way, have been removed from the register of companies in the Caymans for non-payment of fees. It must be hard to find a few thousand dollars when you have only a billion or so to play with.

Very interesting story this - good on Woodford for exposing the truth.

Well, it all starts to make sense now. He has ruffled feathers in the Old Boy`s network. Now, he will get the Horiemon treatment.

Badmigraine:

Wow, thanks for the link to the letter. That is indeed a major hornet´s nest he has poked into. I am rooting for the guy...

And what legal action would that be? Nothing he has said has been proven to be a lie.

You can still be sued for disclosing confidential business information, particularly when it causes your company's stock to tank.

888naff, if you bothered to read the thread you would realize that nobody is jumping to conclusions. The facts are pretty damning all by themselves and it is hard to avoid the conclusion that massive fraud has taken place. Based on all the evidence we have, Mr. Woodford has behaved correctly. Why do you feel the need to attack him? I can only assume it is because he is not Japanese.

I don't think a person with something to hide chooses to present to financial regulators a detailed document prepared by independent professionals, or discusses a matter openly with the global media to ensure maximum scrutiny. I think people with something to hide refuse to discuss important matters and instead attempt to silence the people who do want to discuss them. As for confidentiality, technically there could be a problem in disclosing certain facts but I think that is trumped by a counter duty to inform shareholders in the company what kind of nonsense was being done in the name of their company.

“We will consider taking legal measures if necessary,” it added.

may fuel further sell- offs(!)

Cannot help thinking that Michael Woodford is nothing better than a corporate spy and a double agent. Yes, there is a story here about Olympus paying a huge sum of money to an advisor for an acquisition. But why did Woodford need to put a file together and hand it to the serious fraud office in the UK? Shouldn't Woodford have been fully consumed in his position as president and then CEO of Olympus? How on earth did he find the time to investigate these payments and put together evidence for the British serious fraud office? Something smells fishy here, especially as the acquisition in question was for a British company and Woodford is also British and has put together evidence for the British serious fraud office.

Once again, it took an outsider with no "understanding of the culture" of corruption and illegal dealings of multinational Japanese companies, this is all very "regrettable" 65 should be a legally binding retirement age, have not accumulated enough wealth by then...suffer. You were honest.

Well well. Now we understand. Got a bit a corruption going on here. Woodford turned out to be a good chap indeed. Tried to make honest men out of them and redeem the company image.

Woodford was a smart bloke. Keeping notes, ready to blow the whistle. Maybe he didn't imagine they'd make him CEO. Maybe Woodford was meant to be the patsy. Seems like he didn't want to be the fall guy.

I wouldn't be surprised if the advisory firm is run by the chairman, seems like this is the case as they wont name the advisory company.

Personally I like Olympus's products. But this case should be investigated thoroughly. I feel confirmed old customs among Japan's big companies should be abandoned. It hampers flexibility of Japan's society.

Fortunately for Mr. Woodford, he got himself out of Dodge and back to the UK after the meeting he was fired in and before this all came to a head. Had he stuck around he might have found himself in a Kabukicho back alley having "an accident."

Shouldn't Woodford have been fully consumed in his position as president and then CEO of Olympus? How on earth did he find the time to investigate these payments and put together evidence for the British serious fraud office?

@TigersTokyoDome: under most jurisdictions covering up criminal action is considered criminal as well. As a CEO he has some personal liabilities and once he knew about the Facta article he had to investigate this in order to cover his own ass.

Can be sued for not wanting to connive at a possible crime of embezzlement, misappropriation and of hiding information, or committing felony even at the threat of losing his job.

@The Munya Times: no, he cannot be sued for reporting to authorities. But he can be sued for disclosing confidential information to the press - which unfortunately was the first thing he did.

Twenty years ago - or about - an American business man of japanese origin wrote a very good book on the "japanese business way". He looked like a Japanese and was fluent in the language of his ancestors, but his way of thinking was totally westernized. Then, when his career led him to work in Japan, he was often misled with a "real Japanese" and was then horrified to discover what Japanese business men did and said sometimes in front of their foreign employees/partners while smiling in a friendly fashion. In this good book, the author explained that was a reason why japanese companies were used to refuse to hire japanese speaking foreigners who could have been able to discover their numerous frauds. When I was young and student in economy, among others I read that book that I've bought for one or two dollars in a paperback shop, and while I found it well written and entertaining, I thought it was a little exargerated.

Several years after, I managed my own little company and worked with several japanese customers, some little, some bigs. All were unstoppable cheaters and tax defrauders. After the sell of my company, I went to Japan where I learned on site that the "samurai's country" was not that "honor country" that is sold to naive foreigners... By the way, even samurais were not what we say about them...

Nothing's new under the sun. And I know it's a little childish, but I feel happy I bought a new camera made by Fujifilm instead of Olympus, last week. I hesitated, but maybe my sixth sense prevented me to give my money to a company like Olympus.

Also, it is not his company any more as he was removed at short notice.

From a legal standpoint that doesn't matter, since it was private information that he got while working at the company. Confidentiality agreements, which are legally binding, state that you can't disclose confidential information even after you leave.

It's not about what you want to be legal, it's about what is legal.

Consider, for a example, a nurse who takes care of a patient but then quits. If the ex-nurse discusses the details of her former patients' medical conditions, she can be sued for violating their privacy.

Agree with you there. These old grease headed men should be all banned from having any management position in this country, they are ruining our country more and more everyday, STEALING money and getting fat and richer. Corruption have become one of our cultural traits it seems to me, Corruption, deception, incompetence, lies!! I would have all these disgusting corrupted old men culled if you ask me. Their lives are not worth it. They are sinking Japan into the sea by the minute, We are in enough trouble as it is. These OLD men are parasites. Enough of corrupted old people in power positions! Enough of these scum. I'm sick and tired of OLD people running and ruining this country. I can wait to see them all dead already. It's time for them to GO!!!

BlueWitch - If only a fraction of Japanese voters thought like this, Japan's future would be a lot brighter

tmarie is bang on! Old geezers like these are ruining the nation... or perhaps more accurately have already ruined it. They are set for life, of course, and through nepotism and OB connections have set up their children to an extent, but these same destroyers implore and even DERIDE the rest of us here to work harder. They say women should be baby making machines while cutting family discounts in favour keeping cigarette taxes and the like from being raised.

The man who was fired for suggesting this change is COMPLETELY in the right, and tmarie is as well in saying these old geezers MUST be gotten rid of!

These company executives, not only them in the article, should go and learn moral and loyalty from the yakuza or the mafia. None of them could survive with such a low moral that these execs have or with members who rob their own organizations.

As a result, companies go bankrupt or just forced to cut jobs sending thousands or tens of thousand of their employees as well as their subcontractors and suppliers jobless to the street or pushes them into hopelessness, illness and suicide. Frankly I don't think any of the underground crime syndicates can boast with crippling so many people's life or even killing them even if in an indirect way, than company execs can. I have to admit the crime syndicates and criminals don't even use the law to commit crimes, though.

According to the BBc, after the meeting in which they fired him, they basically confiscated his car, escorted him back to his place to pack after demanding he hand over his key, then strong-armed him to the airport! Very dodgy behaviour if they have nothing to hide.

You can still be sued for disclosing confidential business information, particularly when it causes your company's stock to tank.

I am trying to translate.

Can be sued for not wanting to connive at a possible crime of embezzlement, misappropriation and of hiding information, or committing felony even at the threat of losing his job. Also, Olympus' execs can still be sued for mishandling company assets, pushing company in the read, bilking shareholders and causing company's stock to fall. It's just a question of viewpoint.

Also, it is not his company any more as he was removed at short notice.

I have to say I got a lot of stick last week for my "Gaijuin' attitude towards the sacking of Mr Woodford and how he didn't understand Japanese management, when actually he just didn't understand why corruption should be part of good management!

typo. Should read "his lips are moving".

gonemadOct. 20, 2011 - 05:54PM JST

But he can be sued for disclosing confidential information to the press - which unfortunately was the first thing he did.

But he had to know what he was doing. Revenge? Playing hard ball? Well calculated action? Improvising? Going on well and smart by finding the clue and suddenly makes a mistake? Is it so simple?

BTW as I wrote before I can't find out if it is still Olympus.

Its funny how arm chair experts jump to conclusions so easily. I heard allegations that Mr Woodfood is not such a great guy either with various things to hide or not be proud of.

Anyway who ever you believe or want to complain about straight away, I wouldn't be surprised to hear more news come out of this spat, depending on whether others will or need to spill the beans ( mr woodfood has been fired after all so maybe thats enough for them).

Kikukawa defines the expression "How do you know when a Japanese leader is lying? Simple, is lips are moving'. Anyone who invests in Japanese companies because they believe what management is saying has obvioulsy done no due diligence. Simply is not in the corporate DNA.

NessieOct. 21, 2011 - 09:23AM JST

Than my logic to turn the inside out to see things from a different viewpoint for Woodford's benefit seem to have failed and probably he will waste a fortune for lawyers. Looks like he started the avalanche.

If only a fraction of Japanese voters thought like this, Japan's future would be a lot brighter

If only they could think at all.

Ya take these old geezers down! We do not need old men running businesses in Japan~

Woodward and old geezers both burn!!!