Briton Scales Heights of Olympus

[dimwit]

We believe we did nothing illegal," Shuichi Takayama, who became president of Olympus on Wednesday, told reporters in Tokyo. "We disclose with sincerity all the information we can."

Meanwhile, the Securities and Exchange Surveillance Commission has reportedly launched an investigation into Olympus to determine if the Tokyo-based medical equipment and camera maker appropriately disclosed information on the acquisition.

Olympus fired Michael C. Woodford on Oct. 14 because company board members couldn't put up with his "selfish management style," Takayama said.

http://www.japantimes.co.jp/text/nb20111027x1.html

I love the term 'selfish management style'. It is Japan in a nutshell, the board of directors is more important than some damn shareholders.

[Marked Trail]

[Dreamy_Peach]

NHK gave it top slot on their 7pm news last night. I guess they were waiting for an official response from Olympus before they gave it any serious coverage, as they held their first proper news conference on it only yesterday.

It may have been best to wait to get both sides of the story and not just rely on the word of Woodford but for me it shows a lack of hunger and aggression in seeking out news. I doubt the BBC would be so restrained (especially given the anti corporate tendencies of many BBC journalists). They would have covered it from day 1 and would surely have sought out a lot of information.

The NHK coverage in itself seemed reasonable enough. There were some things they didn't mention. They mentioned the 30% of fees for the M&A advisors, but didn't mention that standard practice is only 1%. They mentioned the three companies that Olympus bought in Japan with a dramatic subsequent loss; but didn't say that these companies were very far from Olympus' core competencies. I can't recall them mentioning anything about the other allegations. A lot of that is kind of rumour based at the moment so is unlikely to feature in their coverage.

Following the Olympus story was another about a company that spent 100m Yen on gambling debts or something. Corporate governance in Japan seriously makes me worried.

http://www.forbes.com/sites/nathanielparishflannery/2011/10/25/a-setting-sun-recent-scandal-at-olympus-a-sign-of-deeper-governance-issues-at-japanese-companies/

[Taro Toporific]

Olympus -- Appointment of 3rd president in 2 weeks fails to convince market
Yomiuri Shimbun | 2011oct27
The confused state of management at embattled Olympus Corp. may continue for a long time, market sources have said.
The firm's problems continued Wednesday, when Tsuyoshi Kikukawa resigned as president less than two weeks after taking over from Michael Woodford, who was dismissed after questioning payments made in connection with corporate acquisitions...[floatr][/floatr]...Kikukawa resigned as president and chairman on Wednesday, and Shuichi Takayama, senior executive managing officer and director, was appointed president...more funny business...

[Samurai_Jerk]

Corporate governance in Japan seriously makes me worried.

http://www.forbes.com/sites/nathanielparishflannery/2011/10/25/a-setting-sun-recent-scandal-at-olympus-a-sign-of-deeper-governance-issues-at-japanese-companies/

... GMI, the New York City-based corporate governance research firm, places Japan 33rd among 38 countries in its corporate governance rankings, behind well-known governance offenders such as Russia and China and behind many emerging market countries such as Brazil and South Africa. ...

Overall, the 392 largest Japanese companies have an average level of board independence of only 20%. By contrast, in the U.S. 92% percent of the largest publicly listed companies have majority independent boards. IN JAPAN ONLY 3% OF THE LARGEST PUBLICLY TRADED COMPANIES HAVE MAJORITY INDEPENDENT BOARDS. Sony Corporation stands out- only two of its 15 directors are non-independent. Other well-known companies like Canon, Toyota, Nintendo and Suzuki have more serious board accountability problems; not one of these companies has appointed a single independent director to oversee operations and help protect shareholder value. ...

[Screwed-down Hairdo]

[quote="Samurai_Jerk"]... GMI, the New York City-based corporate governance research firm, places Japan 33rd among 38 countries in its corporate governance rankings, behind well-known governance offenders such as Russia and China and behind many emerging market countries such as Brazil and South Africa. ...

Overall, the 392 largest Japanese companies have an average level of board independence of only 20%. By contrast, in the U.S. 92% percent of the largest publicly listed companies have majority independent boards. IN JAPAN ONLY 3% OF THE LARGEST PUBLICLY TRADED COMPANIES HAVE MAJORITY INDEPENDENT BOARDS. Sony Corporation stands out- only two of its 15 directors are non-independent. Other well-known companies like Canon, Toyota, Nintendo and Suzuki have more serious board accountability problems]

Japanese corporations certainly put the 'ell into "rotten" as 'to the core."

[Mike Oxlong]

Another deal by Japanese camera maker Olympus faces questions

Another questionable deal has come to light just days after the chairman of embattled Japanese camera maker Olympus stepped down, the Wall Street Journal reported.

The latest controversy involved the purchase of a U.S.-based orthopedic business in which Olympus gave a $23 million loan to U.S.-based merchant bank Viscogliosi Brothers–an adviser on the deal–which it later wrote off...

[Screwed-down Hairdo]

Now that this is truly becoming a quagmire, I just had a thought (always dangerous at the best of times)...considering this scandal involves Olympus, I wonder whether someone had the foresight to capture all this on camera...?

[Ganma]

Now that this is truly becoming a quagmire, I just had a thought (always dangerous at the best of times)...considering this scandal involves Olympus, I wonder whether someone had the foresight to capture all this on camera...?

They could use Kodak film.

[Coligny]

[quote="Ganma"]They could use Kodak film. ]

Didn't they stop making camera film ?

[Ganma]

Didn't they stop making camera film ?

Yes. The company looks worse off than Olympus:

In January 2009, Kodak posted a $137 million fourth-quarter loss and announced plans to cut up to 4,500 jobs.
On June 22, 2009, Eastman Kodak Co announced that it will retire Kodachrome color film by the end of 2009, ending its 74-year run after a dramatic decline in sales.
http://en.wikipedia.org/wiki/Kodak#21st_century

[dimwit]

Olympus, as I have said before was some pretty good core assets and whatever the outcome their medical equiptment business will definitely stay afloat.

[Iraira]

Olympus, as I have said before was some pretty good core assets and whatever the outcome their medical equipment business will definitely stay afloat.

You just like them because their endoscopy cameras tickle as they head down your esophagus.

[legion]

Olympus, as I have said before was some pretty good core assets and whatever the outcome their medical equiptment business will definitely stay afloat.

I had a scan earlier this year, noticed the machine was made by GE, "same as the reactors at Fukushima eh" I quipped, I obviously wasn't the first person to make this devastatingly witty comment.

Buyers of medical equipment expect the highest standards of compliancy. Olympus will be OK so long as there isn't a credible alternative, if there is things will be very tough on the employees whose hard work generated the money which has been looted. Over time this really could go either way.

[Ganma]

[Samurai_Jerk]

Olympus, as I have said before was some pretty good core assets and whatever the outcome their medical equiptment business will definitely stay afloat.

I'm sure that business unit will survive. That doesn't mean it will be owned and operated by Olympus though.

[matsuki]

"What worries me is that it will be a problem if people take the events at this one Japanese company and generalise from that to say Japan is a country that (does not follow) the rules of capitalism," he told the paper, adding: "Japanese society is not that kind of society."

Bwahahahahahahaha! In other words, the world will see Japanese society without the politeness and fantasy blanket on top

[Mulboyne]

Well, Olympus has now admitted that the company deliberately overpaid during its recent M&A transactions as a smokescreen to cover up booking losses incurred in the 1990s.

It's not a crime to have made bad investments which lost money. However, some questions now are:

- Were those original investments reckless? For instance, was management punting around in exchange rate derivatives instead of using them for hedging?

- Did previous efforts to conceal the losses actually make them worse?

- Is this a case of fraudulent accounting?

- Who signed off on everything from the original loss-making deals through to the cover-up?

[Yokohammer]

Yes, the poop is really hitting the rotary ventilating unit now. They've fired Mori, the VP, too.

But basically the fact that they've lied about the whole deal the whole time indicates that they themselves believe they're in the wrong.

So now that Woodford has been vindicated, does he get his job back?
[SIZE="1"](Yeah, right, fat chance ...)[/SIZE]

[Mulboyne]

[Kuang_Grade]

Olympus admits acquisitions used to hide investment losses
http://news.yahoo.com/olympus-says-used-m-funds-cover-investment-losses-001410330.html

Olympus said it had found that funds related to its $2.2 billion purchase of British medical equipment maker Gyrus, which involved a massive advisory fee of $687 million, as well as three domestic firms were used to hide losses on the securities investments.

The disclosure leaves Olympus open to possible criminal charges for suspected accounting fraud and shareholder suits, lawyers and analysts said, putting the future of the 92-year-old company in doubt.

"This is very serious. Olympus admitted it has made false entries to cover its losses for 20 years. All people involved in this over 20 years would be responsible," said Ryosuke Okazaki, chief investment officer at ITC Investment Partners. "There is a serious danger that Olympus shares will be delisted. The future of the company is extremely dark."

The announcement sent Olympus shares tumbling 29 percent to a 16-year low on Tuesday. The company has lost 70 percent of its value, or $6 billion, since it fired Woodford.

[Taro Toporific]

[SIZE="5"]IT'S ALL THE DAMN GAIJIN'S FAULT![/SIZE]


via

[Mulboyne]

Reuters via Asahi: Olympus scandal tied to banker who shuffled losses

A former Japanese banker who helped Japan's Olympus Corp shift losses off its books decades ago appears to be a key figure behind its decision to award a massive advisory fee to a little-known U.S. investment firm, Japanese broking sources who know the ex-banker said. Akio Nakagawa, who worked for the New York-based firm that won the stunning $687 million fee, has had business dealings with the once-venerable camera-maker for three decades, said the sources who were familiar with his activities and career. As part of his relationship with Olympus and other corporate clients, Nakagawa also provided a type of financial engineering designed to temporarily shift losses from their books in a way that was both lawful and popular in the early 1990s, they added.

Olympus, engulfed by scandal since its sacked CEO-turned-whistleblower revealed the fee last month, confirmed on Nov. 8 it had engaged in this practice in the 1990s to defer publicly reporting losses suffered on securities investments. In a statement that followed Reuters' questions to the firm about its accounting practices and Nakagawa, Olympus also said several M&A deals struck a decade later, including one relating to the advisory fee, had been used to offset these long-standing losses. The company said this fact came to light after an investigation into past M&A deals by a third-party panel which was named a week ago. It has declined to answer questions about its ties to Nakagawa, saying it did not disclose information about individual business relationships. Nakagawa, who does not stand accused of any wrongdoing, could not be reached for comment and his whereabouts are unknown.

Olympus shares dived 29 percent after its announcement on Nov. 8. The firm has now lost 70 percent of its market value following revelations of the $687 million fee, among several odd-looking deals. Shareholders have demanded to know why it paid such a vast sum to a small U.S. outfit few had heard of. Olympus has declined to give a detailed explanation, pending the independent probe, but the sources say part of the answer lies in its long-standing relationship with Nakagawa. "He was seen as a useful guy by his corporate clients," said a former executive at a major Japanese bank who says he met Nakagawa at the time he was engaged in so-called "portfolio reshuffling" on behalf of Japanese firms.

Companies used portfolio reshuffling in the early 1990s to avoid taking big paper losses on share portfolios which had crashed along with Japan's 1980s bubble economy. The idea was to craft transactions that shifted the losses from a parent company to another holding firm or a fund, a temporary maneuver to keep the losses off the parent's books until, hopefully, share values recovered. In the early years after the crash, the practice was widely known and legitimate, but share prices never fully recovered and regulators later cracked down on it, the broking sources said.

Nakagawa was head of equities for Wall Street bank PaineWebber in Japan in the early 1990s when the practice of shuffling losses around was at its peak, they added. At that time, some Japanese firms were in denial about the collapse in stock values, wrongly believing they would bounce back in time for the transactions to be reversed. And sometimes brokerages that had sold them the loss-making investments in the first place were willing to help their clients in this endeavor, taking on their clients' losses in the interests of keeping their business over the long term. Japan's benchmark Nikkei 225 index has never come close to regaining its 1989 peak and the market still trades at about a quarter of its value back then.

WORLD'S LARGEST M&A FEE

Nakagawa worked at established investment banks until 1998 when he teamed up with Hajime Sagawa, an ex-colleague from his early days in the 1970s at Japan's Nomura Securities. He joined Sagawa's Axes America, according to a U.S. regulatory filing. Sagawa, who has so far been the main focus of questions over the fee, lives in Florida and has also not been able to be reached for comment, although Sagawa's wife has told Reuters he is traveling and has done nothing wrong.

In 2006, Olympus hired Axes America to scout out acquisition targets and, two years later, agreed to pay Axes the world's largest M&A advisory fee, according to Thomson Reuters data, for its $2 billion purchase of UK medical equipment firm Gyrus. The fee was equal to a third of the purchase price, eclipsing investment banking industry norms of 1-2 percent. Axes negotiated to be paid the Gyrus fee in both cash and stock, and transferred the rights to the stock component to an affiliated firm, Cayman Islands-registered AXAM Investments, which in 2010 sold the stock back to Olympus for $620 million. Sagawa also held himself out to be a director of AXAM, according to an internal Olympus document obtained by Reuters, though there is no evidence of Nakagawa being linked to AXAM.

The FBI and the Japan Securities Exchange Surveillance Commission are looking into this fee and other Olympus deals after ex-CEO Michael Woodford wrote to the authorities following his dismissal. He also alerted Britain's Serious Fraud Office. After his dismissal on Oct. 14, Woodford said he had been fired for asking questions about the Gyrus fee. Olympus says it sacked Woodford for his management style and misunderstanding of Japanese culture. It denies any wrongdoing but has so far declined to reveal the identities behind Axes. It says it doesn't know their whereabouts.

'MIGRATORY BIRD'

Nakagawa already had business dealings with Olympus when he joined Drexel Burham Lambert in 1988, and he kept Olympus as a customer as he worked for a series of Western investment banks in the years that followed, the sources said. "He was one of the first generation to make the shift from Nomura to the foreign houses. He was like the migratory bird of Western banks," said one Japanese securities industry source. U.S. brokerage regulator FINRA's records show that between 1977 and 1996 Nakagawa worked at Merrill Lynch, E.F. Hutton and Co Inc, Shearson Lehman Hutton Inc, Drexel Burnham Lambert and PaineWebber, before settling in 1998 at Axes America.

He was there until 2007, and also served for some years as the president of Axes Securities Japan, the records show. Axes Securities Japan has since lost its securities dealing license and is now listed as Axes Japan. Axes Japan did not return calls for comment. Nakagawa and Sagawa both started their careers at Nomura Securities, Japan's top investment bank, and would later be colleagues at both Drexel Burnham Lambert and PaineWebber. Banking industry sources who know both men believe Nakagawa would have been more directly involved in cultivating and managing Axes' relationship with Olympus due to his long-standing business relationship with the company.

The Japanese practice of portfolio reshuffling was gradually banned by securities regulators during the 1990s, but securities industry sources say brokers found new, legal ways to provide the same service and keep good relations with corporate clients. No public records are available for PaineWebber's client deals during Nakagawa's time there, but a 1992 regulatory filing suggests Olympus may have shuffled assets in a pattern consistent with methods used to avoid losses, according to investment bank sources asked to comment on the filing.

The document submitted to the Japan Financial Services Authority by Credit Suisse First Boston (CSFB) cited Olympus as recipient of a "scheme to enable the repurchase or resale of assets and liabilities from investment trusts". The filing was made after the authority demanded CSFB disclose all of their client activity relating to postponement of losses.

[2triky]

Olympus admits acquisitions used to hide investment losses
http://news.yahoo.com/olympus-says-used-m-funds-cover-investment-losses-001410330.html

The bones done fell out the closet.

[maraboutslim]

Can anyone explain how this worked? Were the large fees recently paid to advisors not really paid but just put down on the books in the place of legitimate losses (that were somehow off the books?). Or were the large fees paid for some service related to this coverup and not to the transaction they were claimed to be for (the new acquisitions)?

[Mulboyne]

Can anyone explain how this worked? Were the large fees recently paid to advisors not really paid but just put down on the books in the place of legitimate losses (that were somehow off the books?). Or were the large fees paid for some service related to this coverup and not to the transaction they were claimed to be for (the new acquisitions)?

In it's simplest form, Olympus had some unrealized losses which they needed to record somehow. They decided to inflate the figure for the fees they paid when, as you suggest, the sums were not actually paid.

It's very likely more complicated than that. At the very least, these other parties would have needed to be in on the cover-up and would have wanted to be paid for their involvement. It wouldn't necessarily make them criminally liable but there is a chance of that.

We don't know whether Olympus still owns the investments which incurred the original losses. If they were completely cleaning house, they may have decided to dump them. To avoid registering a write-down, the company could have arranged for a third party to buy the investments from them at the original purchase price, perhaps wrapped up in a fund or some other vehicle.

The third party might then have liquidated this investment and taken the loss themselves. Olympus would subsequently have compensated the third party for these losses by paying them an overblown fee for an unrelated service. That sort of transaction would be complicated by tax on both sides, and it remains to be seen whether there was any wrongdoing in that respect.

As the Reuters article above suggested, many firms turned to financial juggling to avoid declaring investment losses and, in most cases, these efforts ended up expanding the problem.

[maraboutslim]

Thanks for the explanation. This is making more sense to me now.

signed, just bought an olympus xz-1 camera last week...

[Yokohammer]

signed, just bought an olympus xz-1 camera last week...

That's OK. Dirty financial dealings don't change the fact that they make pretty decent cameras.

[Coligny]

That's OK. Dirty financial dealings don't change the fact that they make pretty decent cameras.

...yet...

you forgot ...yet...

[Taro Toporific]