Olympus Prez: 'We have conducted extremely improper accounting'

Top officials of Japanese corporation Olympus, which makes cameras and medical supplies, admitted that the company had been using acquisitions to hide decades of losses that date back to the 1990s, according to NPR, with president Shuichi Takayama, who took over in late October, saying in a statement that the company had “conducted extremely improper accounting.”

The company had been under intense scrutiny over a $687 million payment to a financial advisory firm in the wake of the acquisition of British medical equipment manufacturer Gyrus, explaining it at the time as an advisory fee, according to the Financial Times. This payment was unusually large, as it represented more than a third of the total acquisition price, rather than the 1 to 2 percent that advisors normally get, according to NPR.

Olympus also recorded a series of acquisitions between 2006 and 2008 of small, unlisted Japanese companies that cost a total of 73.4 billion yen ($941 U.S.), the value of which were all written off within a year, said the Financial Times. The companies had little discernible revenue or business history, and seemed peripheral to the company's core business, according to the Wall Street Journal. The fee had raised concerns with the company’s auditor at the time, KPMG, prompting the company to swiftly switch auditors to Ernst and Young in response, according to leaked internal memos obtained by the New York Times.

While the company had at first insisted that there was nothing unusual about these transactions, Olympus today admitted that the inflated advisory fee and the acquisition of obscure, unrelated companies was actually to cancel out non-performing securities that Olympus was keeping off its books, according to Bloomberg. The affair has been compared to a Tobashi scheme, a type of financial fraud that became widespread in Japan in the late 80s and led to the collapse of the firm Yamachi Securities Co., which used overseas paper companies to hide problematic securities, until it failed in 1997 with 260 billion yen ($3.3 billion) in hidden impairments, Bloomberg reported.

Takayama, Olympus president, laid the blame at the feet of three Olympus executives—former chairman Tsuyoshi Kikukawa, vice president Hisashi Mori and corporate auditor Hideo Yamada—for the cover-up, and said he was unaware of it until he was told about it on Monday, according to the Wall Street Journal. Takayama said today that Mori has been fired, Kikukawa resigned two weeks ago and Takayama is considering his own resignation, according to the Wall Street Journal. Takayama said he is also considering filing a criminal complaint against the trio as well, according to the Globe and Mail. Last week, Reuters reported the German government had charged three former managers at Olympus’ European branch with fraud.