- Ousted British CEO recently accused Olympus of mislaying more than $1B in shareholder cash
- The truth about what happened has emerged fitfully, and revelations are incomplete
- The company now says money it claimed to have spent on acquisitions was to cover losses
- President Shuichi Takayama called the actions "highly inappropriate" and apologized
In the three and a half weeks since Olympus' ousted British chief executive accused it of mislaying more than $1bn of shareholders' money, the truth has emerged fitfully, in a series of half-disclosures that have invited more questions than they answered.
The latest revelation, while the most startling so far, is just as incomplete.
In an abrupt reversal, the company now says money it claimed to have spent on acquisitions -- including its 2008 purchase of the UK medical equipment group Gyrus -- was actually used to patch up its own balance sheet, after losses were made under now-retired executives in the 1990s.
"It has become clear that advisory fees and funds used to buy back preferred shares in the acquisition of Gyrus, as well as funds used in the purchase of three new domestic businesses ... were used, among other things, to dispose of unrealised losses on securities, the reporting of which had been put off," Olympus said.
Shuichi Takayama, its president, called the actions "highly inappropriate" and apologised for causing "trouble". But he asserted the three directors who have been implicated in the affair -- two of whom lost their executive positions on Tuesday -- had acted with the company's best interests at heart, having "inherited" the repair effort from unnamed predecessors.
Among the issues Mr Takayama declined to address were the size and origin of Olympus' past losses; the identity of the executives who approved the initial cover-up; the exact means by which it was executed; and the reason it took so long to dispose of the bad assets.
He said he feared prejudicing the work of a group of legal experts that is examining the affair, but Olympus' biggest shareholder, the Japanese insurance group Nippon Life, joined others in pressing for more disclosure. It said: "We want [Olympus] to be firmly accountable to dispel uncertainties."
The limited explanation that was offered has invited comparisons with Japanese corporate scandals of the 1990s, in which securities brokerages helped companies stung by the asset bubble of the previous decade to hide their losses in temporary off-balance-sheet havens -- a trick known as tobashi, meaning "to make fly away".
In many cases the losses would be paid off over time, in quiet deals with the brokers or third-party investors that saved companies from embarrassing -- and in some cases potentially bankrupting -- one-time disclosures. That might explain how Olympus was solving a 1990s problem by overpaying for acquisitions in the late 2000s.
Ken Kiyohara, a lawyer at the firm Jones Day, said: "There hasn't been such a glaring case [of tobashi] in years."
Mr Takayama said the executive who confessed about the losses late on Monday night claimed the pay-outs were not abused for private gain. That has not been verified, however, and Mr Takayama said Olympus had yet to trace all its money.
The two little-known financial firms involved in the deals -- Axes Securities, which took payment of $687m in the Gyrus acquisition, and Global Company, which arranged the three deals in Japan in which Olympus paid a total of Y73.4bn -- have effectively disappeared. How much they kept for themselves in return for their services remains unknown.
Olympus' own share price, already down by half since the chief executive who blew the whistle on the affair, Michael Woodford, was sacked on October 14, lost a further 30 per cent on Tuesday. The Tokyo Stock Exchange says the company could lose its listing if it lied in its published accounts -- though softer remedies are also possible -- and Japanese media report that prosecutors are moving toward a fully fledged investigation. The US Federal Bureau of Investigation is already looking at American connections in the affair.
Bewilderingly, Olympus is sticking by its initial insistence that it sacked Mr Woodford, a Briton, because he was a "high-handed" manager who failed to master Japanese business culture. Mr Takayama said he still believed he was unsuited to run the company and wrong to make its problems public.
Olympus' remaining board members and auditors also have questions to answer, about how large losses could be hidden for so long by what the company claims is a small handful of executives, and why directors fired Mr Woodford without any apparent examination of his claims.