Briton Scales Heights of Olympus

[Mulboyne]

Unfortunately, everyone lost on the bottom line from this, and that's all that stockholders care about. They don't care if Woodford did the right thing or did the wrong thing, they only care about their money.

A quick look at the portfolios of Japanese institutional investors would suggest that money is not their chief concern. Cross shareholdings, in particular, are not directly motivated by financial considerations.

"When it doubt, do nothing" is a major driver of decisions in Japan. Woodford required Japanese investors to take an actively supportive stance towards him and they were not prepared to do this. The absurdity is best highlighted by the fact that Sumitomo Mitsui effectively gave support to Takayama just as the investigation was recommending that Olympus sue him.

I don't know whether Woodford is a busted flush or not. It may be that Japanese investors later rationalize their refusal to support him by depicting him as a loose cannon. To suggest they have an opinion at all at the moment beyond, preferring not to think about the matter, is to give them far too much credit.

Woodford did the right thing.

1) He was appointed president of the company and brought a potentially serious problem to the attention of the management and demanded an explanation.

It's worth reiterating that the problem Woodford brought to the board looked very much like a criminal matter. This wasn't about an overrun in the R&D budget.

[Coligny]

Looking through the lens of the retrospectoscope, quietly going to the authorities through a proxy, while building an alliance of influential board members and major stockholders might have been a strategy that worked.

Then:

Unfortunately, everyone lost on the bottom line from this, and that's all that stockholders care about. They don't care if Woodford did the right thing or did the wrong thing, they only care about their money.

Yesterday night I wanted to come back on the first quote which didn't look like something well though until zee end... but you manage to contradict yourself and like a broken clock be right twice a day...

His strategy sure didn't. It appears that he just fired off his letter to the board without any real preparation, then went public.

Having been is these kind of situation. The only strategy you usually want to play when you discover these can of worms is not ending up covered in shit.
So either you just go away for pesonnal reason... no harm but you stay a coward. (and some people might be able to see whut happened and fall some blame on you after the card castle collapse).
OR you blow the shit out to the authorities. and all the strategy you need is where to find a job for another company.

I understand that a weasel would use these kind of situation for their own benefit and would not understand a boy scout like Woodford seems to be... But... not understanding something is not an excuse to decide they are wrong and comeup with your cute own little rationnalisation...

[damn name]

I don't disagree with you , Mulboyne, about the purity if his motivations or the enormous hurdles he was trying to overcome, or the evilness of cross-holding shareholders. I just think that the fight could not be won without him having a ace up his sleeve, such as a controlling interest shareholder as a partner in fighting the board.

He was president, not chairman, and served at the pleasure of the entire board and that's how it works. You know this.

Try writing a letter to your boss, demanding he resign, and see how things turn out for you.

He accomplished nothing. Maybe he should have even left, securing his future, before he went public and to the authorities.

-----

Coligny - fuck off. I don't care what you think about anything. Go do the dishes.

[Mulboyne]

I don't disagree with you , Mulboyne, about the purity if his motivations or the enormous hurdles he was trying to overcome, or the evilness of cross-holding shareholders. I just think that the fight could not be won without him having a ace up his sleeve, such as a controlling interest shareholder as a partner in fighting the board.

The danger of describing this whole affair as a cultural conflict is that it obscures the fact this was a crime scene. The conflict was between people with a dirty secret and a man who threatened to expose them. There's nothing intrinsically Japanese about wanting to avoid being caught.

There's a real danger in promoting a narrative which seems to say that Japanese business practices are inevitably at odds with doing the right thing. We know from conflict in other Japanese boards, where no foreigners are involved, that there are executives who know what action should be taken in the face of wrongdoing. Olympus had no such officers.

I don't believe the Japanese shareholders have been evil. They have simply been incompetent. Not incompetent in refusing to support Woodford's return but certainly so in supporting executives who they may well end up suing.

[IparryU]

I don't believe the Japanese shareholders have been evil. They have simply been incompetent. Not incompetent in refusing to support Woodford's return but certainly so in supporting executives who they may well end up suing.

a bit ass backwards... or wearing their ass hat on their head... or putting their jimmy had on their foot...

[Yokohammer]

The danger of describing this whole affair as a cultural conflict is that it obscures the fact this was a crime scene. The conflict was between people with a dirty secret and a man who threatened to expose them. There's nothing intrinsically Japanese about wanting to avoid being caught.

There's a real danger in promoting a narrative which seems to say that Japanese business practices are inevitably at odds with doing the right thing. We know from conflict in other Japanese boards, where no foreigners are involved, that there are executives who know what action should be taken in the face of wrongdoing. Olympus had no such officers.

I don't believe the Japanese shareholders have been evil. They have simply been incompetent. Not incompetent in refusing to support Woodford's return but certainly so in supporting executives who they may well end up suing.

No real argument with any of this, except to point out that it is the Olympus board who are playing the culture card as hard as they can without being out-and-out racist. "Selfish management style" is a pretty obvious euphemism for "non-Japanese management style," or to put a finer point on it, "a management style that is not compatible with our more harmonious, non-confrontational, you-scratch-my-back-and-I'll-scratch-yours methods".

And "our biggest mistake was hiring a foreigner as president" is about as blatant as it gets. If memory serves that was the now-retired chairman, but being retired doesn't make it OK.

At its core the issue may not be cultural, but the way the board has treated and maligned Woodford most definitely is.

[matsuki]

No real argument with any of this, except to point out that it is the Olympus board who are playing the culture card as hard as they can without being out-and-out racist. "Selfish management style" is a pretty obvious euphemism for "non-Japanese management style," or to put a finer point on it, "a management style that is not compatible with our more harmonious, non-confrontational, you-scratch-my-back-and-I'll-scratch-yours methods".

And "our biggest mistake was hiring a foreigner as president" is about as blatant as it gets. If memory serves that was the now-retired chairman, but being retired doesn't make it OK.

At its core the issue may not be cultural, but the way the board has treated and maligned Woodford most definitely is.

Hahaha! Japaneeeeze at it's best. Hire an effective "famous" security guard and then attempt to steal from yourself to commit insurance fraud...then blame the honest security guard when you get caught when he actually does his job rather than go along with your fraud.

[Coligny]

Coligny - fuck off. I don't care what you think about anything. Go do the dishes.

T'was laundry... Don't hurt mah feelingz...

[omae mona]

He accomplished nothing.

He uncovered a massive fraud. Many investors might have, but didn't, buy shares of Olympus at an overinflated price, reflecting an incorrectly valued asset. They should be grateful to him for revealing the truth before they bought.

Otherwise they would have found themselves taking an undeserved loss later as the bogus writeoffs continued (or if the fraud was eventually discovered).

Sounds like an accomplishment to me. It's a staggering amount of money at stake.

[legion]

I think as omae mona pointed out the risk of being compliant with insider trading is pivotal. Woodford had no option but to go public one way or another, it was just a question of how. Trying to solve the problem in house first was a mistake, but one he was bound to make as a veteran employee of the company, it was his entire world.

I think he would have done better had he dumped the file on the desk of the Nikkei, the regulator of the Japanese stock exchange and the Japanese fraud squad all on the same day, then gone back to his office and waited.

Maybe he'll get a job as a hit man for Price Waterhouse

[2triky]

The lawsuit is on...

[damn name]

Sounds like an accomplishment to me. It's a staggering amount of money at stake.

It was about 10% of one year of sales and it happened 15 years ago. So, that's about 1% of total sales over that time.

MF Global stole outright about the same amount from customers. Olympus didn't steal any money. They hid investment losses, which certainly affects stock price, however very little Olympus stock is traded. The stock volume is miniscule because there are few private investors - the stock is down to about 1.2 million yen per share. It isn't cheap. So, the only people harmed are the "evil" institutional investors... No whales, dolphins, tuna or beef cattle were harmed by this.

Consider this: if none of this had come to light, it's likely that no one would know since the losses would have been accounted for on paper by now or very soon, which is what this is about. The money is insignificant, not staggering. It's a paperwork thing. Even Woodford didn't know until someone told him about the magazine article.

If you want "staggering," check out AIG, Fanny Mae, Freddie Mac, the FED, the Euro, Lehman Brothers, Anglo Irish Bank, Health South, WorldCom, Tyco...

There is a difference between stealing money, and accounting twists that affect shareholders. It's like weeping for people who don't win the lottery.

In the end, the institutional investors decided that supporting Woodford would be less profitable to them than not supporting him in a proxy fight.

Unless you're not a stockholder, supplier or employee of Olympus, I can't see how this affects anyone. What's the point, unless you actually think that your moral outrage about paperwork is going to change the business culture of hiding losses? And that is not unique to Japan.

[Mulboyne]

It was about 10% of one year of sales and it happened 15 years ago. So, that's about 1% of total sales over that time.

You could calculate it as a percentage of Japanese GDP over 15 years and try to make it seem even more insignificant. However, that's not the relevant metric and nor are the percentages of one year's sales, or 15 year's sales.

Olympus is a corporation and, if accounts are accurate, managed to wipe out its capital base - it certainly paid dividends illegally. Those are the only figures that count. Baring Securities went bankrupt after losing far less than Olympus and the man who covered up those losses went to jail.

As a major exporter, Olympus requires the services of the financial markets to conduct its business and access would have been shut down if the true state of its own finances had been known. It's already obvious that the situation was more dire than you describe, because executives resorted to unlawful means to conceal it.

If Olympus had come clean about its losses, then the executives would have lost their jobs and other companies or private investors would have had been able to acquire the assets of the company and run them more efficiently. The government could not have stepped in to support the company because that would have shut down export markets. Given the state of trade talks at the time, there's no way America would have accepted the public subsidy of a a foreign manufacturer.

Olympus executives did misappropriate money. They used company funds to cover up the losses and even lost money on other high risk investments which were an attempt to bet on black to keep the numbers more manageable.

[damn name]

Olympus operated and continues to operate today, employing, selling and buying. If it was that dire, why is that? Should the company be liquidated and everyone let go? Operating profit hasn't been all that bad over the last 15 years.

Do you think the current management is incompetent? If so, who should be running the company? Do you have someone in mind?

And just for the record, put me down in the camp that believes there is no group of thieves more unethical than the "financial industry."

You seem particularly interested in this Olympus strory. You're Woodford, aren't you?

I think Barings lost about the same amount, not "far less," but that was double the money it had available for trading... And that was other peoples money. Olympus sells almost $10 billion per year of products and creates value. Companies that manufacture and contribute to society with useful products, such as endoscopy cameras, don't play with margin accounts and play with money, like securities "companies" who create nothing and add no value.

[Mulboyne]

Olympus operated and continues to operate today, employing, selling and buying. If it was that dire, why is that? Should the company be liquidated and everyone let go? Operating profit hasn't been all that bad over the last 15 years.

It had access to capital to keep operating: access which it would not have had if its true financial position had been known. If every insolvent company is allowed the same access to financing as solvent companies, then it would be a major penalty for companies which are well-run, and don't make high risk investments in non-core businesses.

How could you expect any discipline from corporate executives if all are allowed to bankrupt their companies with no penalty?

The alternative isn't the annihilation of the assets, it's the transfer of assets to people who can run them more responsibly. Olympus was, and is, a going concern with businesses throwing off cash. The company could have been recapitalized and kept in the game. Very likely, the only people who would have lost their jobs would have been the managers who put the whole company at risk. They knew that, which is why they tried so hard, for so long, to cover their tracks.

As it is, they wasted more company money - other people's money, not their own - in the attempt over many years. Who knows where Olympus might have been, and how society would have benefited, if all that money and capital had gone to people who could use it more effectively for society.

[damn name]

Olympus is bankrupt? Where did you read that?

There are plenty of companies (and countries) with much worse balance sheets and P&L's who have capital available. I guess you're in favor of cutting off capital to most of Europe, Japan and the US, which is so bankrupt it owes 2/3rds of all the debt on the planet?

Returning to the "cultural differences" issue for a moment, which I didn't bring up, I think there was an issue. I hate to rehash the obvious, but we all know that Japanese employees will go to any length to avoid making the company or company executives look bad to the outside - naka or uchi.

They'll risk personal liability to keep the tatemae positive. Perhaps they thought Woodford was a company man, someone who would protect the image of the company as they all would do.

He was a western businessman, though. He would not risk himself, so he turned everyone in and embarrassed the company.

Now, it doesn't matter which side of the fence you're on in that difference, but that is that perceived difference, and it's company culture and cultural culture, if that makes any sense...

Did the Olympus board or past/current leadership enrich themselves in their coverup? They didn't line their own pockets.

As far as managing companies, the executives got to be executives by virtue of their successful business, technical or marketing acumen that was honed for decades. To think that you can replace that industry and company knowledge with outsiders is, well, folly. You want the second string players to lead the team now?

[Greji]

Olympus is bankrupt? Where did you read that?

He was stating that in the abstract wherein the company had used up all available capital and relying on its own name and external financing gained under illegal means when it was literal bankrupt. It only lacked the filing.

There are plenty of companies (and countries) with much worse balance sheets and P&L's who have capital available. I guess you're in favor of cutting off capital to most of Europe, Japan and the US, which is so bankrupt it owes 2/3rds of all the debt on the planet?

You're using bankrupt in the same context here.

Returning to the "cultural differences" issue for a moment, which I didn't bring up, I think there was an issue. I hate to rehash the obvious, but we all know that Japanese employees will go to any length to avoid making the company or company executives look bad to the outside - naka or uchi.

They'll risk personal liability to keep the tatemae positive. Perhaps they thought Woodford was a company man, someone who would protect the image of the company as they all would do.

You are only partly right in your assumption. Since the mid 1980's, I have worked for the Japanese government, for affiliated government associations and then and now, in the Japanese private sector. In each of these positions, I was the only roundeye aboard, so I'm pretty familiar with how they operate. Most employees do have that "perceived" responsibility of loyalty to the company. However, the company in turn, has a responsibility to be loyal to the individual, which is how they keep the employees loyal in the first place. It is not some magnificent cultural icon. If the company severed ties with a Japanese employee in the same matter as how they fired Woodford, all bets would be off! A Japanese employee would be (and have been) quite capable of being a whistle blower when not treated right in this fashion.

He was a western businessman, though. He would not risk himself, so he turned everyone in and embarrassed the company.

Now, it doesn't matter which side of the fence you're on in that difference, but that is that perceived difference, and it's company culture and cultural culture, if that makes any sense...

If you re-read the information, Woodford attempted to resolve it in house, pointing out that it would eventually come out by other methods. He even recommended that the Chairman should retire and if necessary, part of, or all of the board should retire. Thus, by using the sekinin culture for business responsibility the would have more time to resolve the problem and get the company back on track. It was then that he was summarily fired and not even given transport out of town. I know more than a few Japanese business people who feel Woodford was right to expose them if for nothing else, the affront to his person and character. Having said that, most of the Japanese business people that I have talked to, did admit that even though they would have probably done the same thing if they were in Woodford's place, they wondered how far they would have been able to pursue it under the Japanese system and in the long run, if they would have been the losers. Either way, it doesn't make what the Execs who were running the show right in Western, or Japanese eyes.

Did the Olympus board or past/current leadership enrich themselves in their coverup? They didn't line their own pockets.

As far as managing companies, the executives got to be executives by virtue of their successful business, technical or marketing acumen that was honed for decades.

They kept their high salaries and fringees , which amounted to a lot of ducats, after fucking the pooch on this deal. Their so-called acumen made the decision to go ahead with this phony cover-up and allowed them to pass it on and on. Since at some point the company would no longer be able to phony-up its position, or this particular deal would come to light, their probable angle of attack was to forward it on until the entire yaikuin staff was long gone and there was nobody left that could be held responsible when the company's insolvency finally did come to light. After all only the stock holders would be the losers, right?

Woodford just made it happen before they were ready. They should have given him a ride to Narita......

[IparryU]

Woodford just made it happen before they were ready. They should have given him a ride to Narita......

they should have also paid for his ticket back home, but it was more of the fuck off concept they wanted to deliver to him.

Thanks for the input, nice to hear a point of view from someone who sat on a j-board.

[damn name]

The most successful executives of major manufacturing companies have usually come from operations and engineering. I just looked at the Olympus guys and it shows that they're all lawyers and financial pukes. (Sony is in a death spiral from having a puke at the helm now, too.)

What's the old saying? Run, don't walk, from any company run by a lawyer or an accountant.

I retract my comment about any acumen they may have had. They can all hang for all I care.

I can't think of anything good that has come out of this affair. Everyone has lost and I don't think anything will change. I think Olympus will go on, restructure some, get a little smaller and continue to find operational financing, with an asterisk on the batting chart.

Sometimes I take a contrary view just to challenge my own bias and thinking. Thanks for the adult conversation.

[damn name]

Report says TPG Capital will invest $1 billion in Olympus in a joint deal with Sony or Canon, Fujifilm or Panasonic...

This may all be just an asterisk on Wikipedia by the end of this year and Olympus will continue on because of its strong annual profit and cash flow in its medical business.

[matsuki]

Report says TPG Capital will invest $1 billion in Olympus in a joint deal with Sony or Canon, Fujifilm or Panasonic...

This may all be just an asterisk on Wikipedia by the end of this year and Olympus will continue on because of its strong annual profit and cash flow in its medical business.

....or this type of stuff may start coming to light at several other major Japanese corporations.

[2triky]

Exclusive: Banker in Olympus scandal steps into public view

By Kevin Gray

DELRAY BEACH, Florida (Reuters) - A Japanese banker who is a key figure in the Olympus accounting fraud came into public view for the first time since the scandal broke, appearing on Friday at his divorce hearing in a Florida court.

Hajime "Jim" Sagawa ran a U.S. investment firm that earned a massive $687 million fee for advising Olympus in a 2008 acquisition deal that ranks as the largest advisory payment in history.

Olympus has admitted the deal along with others was part of a 13-year scheme to cover up $1.7 billion in losses in an accounting fraud that has caused the company's stock market value to drop around 40 percent since October.

The scandal, involving inflated advisory fees and prices in acquisition deals, has triggered investigations by law enforcement agencies in the United States, Japan and Britain.

An outside investigation commissioned by Olympus found the scheme was hatched by several key executives and aimed to hide losses from investors, but law-enforcement agencies are continuing their investigations.

The whereabouts of Sagawa, a former PaineWebber banker, were unknown until Reuters located him when he attended the divorce hearing in a state court in Delray Beach, Florida.

When asked about the Olympus case, he responded with a terse "no comment." Pressed further, he waved his hand and said "it's rude" to keep asking.

Dressed in a blue sport coat and gray slacks, Sagawa emerged with his ex-wife from a courtroom after a final divorce hearing.

The couple walked briskly to a parking garage after being asked again to comment on the scandal that has rocked Olympus and left the Japanese medical equipment and camera maker in need of a capital infusion and at risk of being delisted from the Tokyo Stock Exchange.

Sagawa ran the Axes America brokerage firm involved in Olympus' $2 billion takeover of British medical instruments company Gyrus.

The Gyrus fee was among several vehicles used by Olympus to disguise securities losses.

Axes America later allocated a large share of its $687 million advisory fee payment to Cayman-based AXAM Investments. That company was later struck off a company registry in the Cayman Islands.

Axes is also linked to another Japanese banker, Akio Nakagawa, whom Reuters located in Hong Kong in late November after he went on the run when the scandal was uncovered. He also declined to comment.

Olympus is suing its current president and 18 other past and present company officials over the scandal.

Until reports of the fraud emerged, Sagawa lived in a luxury waterfront house in Boca Raton, Florida, but was unable to be located afterward.

His ex-wife has repeatedly defended his involvement with Olympus and said she did not know where he was.

Sagawa has not responded to repeated emails and phone calls seeking more detail on Axes America's role in the scandal.

The Sagawas filed for divorce in October, days after the Olympus accounting fraud surfaced when the company's former chief executive, Michael Woodford, blew the whistle on the Axes America advisory fee and other deals.

In a divorce petition filed in October, the Sagawas, who married in 1979 in Tokyo, cited "irreconcilable differences."

The couple listed more than $11 million in combined assets and Sagawa reported a monthly income of $2,500 with $1,800 coming from social security and $700 from interest and dividend payments.

According to their settlement agreement, Ellen Sagawa will receive nearly $9.9 million in assets, including their Boca Raton home valued at $2.5 million. Also among the assets are $6.7 million held in a savings account.

Sagawa will keep nearly $1.5 million in assets that include $1.3 million in several retirement plans, $100,000 in a savings account and $100,000 in a brokerage account.

Source

[maraboutslim]

What kind of funny business accounts for her getting $9.9mil out of assets and he just $1.5mil? Is this a paper divorce and settlement designed to protect the assets from being recovered in a lawsuit or something?

[2triky]

What kind of funny business accounts for her getting $9.9mil out of assets and he just $1.5mil? Is this a paper divorce and settlement designed to protect the assets from being recovered in a lawsuit or something?

That judgment on its face certainly begs the question. Hard to say without more details, but it is curious.

[Samurai_Jerk]

Fuck, this cat got screwed harder than Hulk Hogan.

Linda, 52, received a little more than 70% of the couple's liquid assets, plus 40% ownership in the semi-retired wrestler's companies and a $3 million "property settlement."

That breakdown of liquid assets meant Linda walked with $7.44 million, and Hogan took away $2.97 million.

I guess the moral of both stories is don't get divorced in Florida if you're a guy.

[Russell]

What kind of funny business accounts for her getting $9.9mil out of assets and he just $1.5mil? Is this a paper divorce and settlement designed to protect the assets from being recovered in a lawsuit or something?

Yes.

Dunno whether it works though.

[matsuki]

What kind of funny business accounts for her getting $9.9mil out of assets and he just $1.5mil? Is this a paper divorce and settlement designed to protect the assets from being recovered in a lawsuit or something?

could be...may not even be truly separated, just divorcing to try and protect what they're holding...

[IparryU]

Fuck, this cat got screwed harder than Hulk Hogan.



I guess the moral of both stories is don't get divorced in Florida if you're a guy.

you forgot to mention the 2x year old riding his harleys, driving his SUVs, and banging his wife in his old house... he even gets to see his ex-wife hug up on his back while he takes her for a spin around the block on his favorite harley...

[Samurai_Jerk]

you forgot to mention the 2x year old riding his harleys, driving his SUVs, and banging his wife in his old house... he even gets to see his ex-wife hug up on his back while he takes her for a spin around the block on his favorite harley...

Yeah, his ex is real classy. Didn't that kid go to high school with their daughter?

Of course if it was the other way around, I'd be giving Hulk a high-five. Instead he got this from Lisa Lampanelli:

[yt]ZHeUxBRyqTo[/yt]

[wuchan]

Fuck, this cat got screwed harder than Hulk Hogan.



I guess the moral of both stories is don't live in Florida.

that state fucking sucks.