The Japan Times
Tokyo, Japan

NOV 26, 2011

                                                               Woodford: Board must be purged

Rehabilitating disgraced Olympus Corp. should begin with the ouster of many of its current board members, former President Michael C. Woodford said Friday in Tokyo.

“These people cannot continue as directors” if the company is to properly account for its coverup of huge investment losses and manage to put the scandal behind it, Woodford told reporters at the Foreign Correspondents’ Club of Japan.

Former Chairman Tsuyoshi Kikukawa and Executive Vice President Hisashi Mori resigned from the company’s board Thursday, while auditor Hideo Yamada also stepped down the same day.

Olympus President Shuichi Takayama has previously alleged the three were behind the scheme.

Woodford voiced optimism and confidence that Olympus will survive the scandal and get back on track, saying the company still has a shot at redemption.

“The strength of Olympus is its people and engineering,” and these are the assets that will enable the company to start moving forward, he said. Woodford was fired Oct. 14 after blowing the whistle on the company’s long-standing use of dubious accounting practices to mask investment losses. The company has already admitted to the accounting irregularities, and both domestic and overseas investigators are looking into the case.

But if the Tokyo Stock Exchange decides to delist Olympus — which was placed on its watch list after the scandal broke — the move would be “a terrible thing for the (firm’s) shareholders and employees,” he said.

Woodford, who together with his two lawyers attended an Olympus board meeting earlier Friday, harshly criticized the firm’s executives, saying the company “has worked hard with black propaganda” to damage his reputation. Woodford has remained a vocal critic of the coverup, despite his dismissal.

He rebutted claims by Olympus executives that during his short stint as president he wasn’t up to the job, and also pointed out that while he was chief he spent about 40 percent of his time in Japan, considerably longer than many other foreign executives working at Japanese firms.

Asked whether he would consider returning to the company that axed him, Woodford said he still feels committed to the Olympus group but stressed that he is “not obsessed about going back.” Such a decision should be made by the company’s shareholders, he added.

Media reports have suggested underworld syndicates were involved in the shady transactions, although a third party panel investigating the scandal has denied any mob links.

Woodford said that while there has been no evidence of involvement by underworld syndicates so far, he is remaining vigilant because of the case’s magnitude and the size of the financial transactions involved.

“I feel much safer than when I left” Japan in October as the story is out in the open, he said.

“(But) this is a bizarre situation I find myself in,” he said. At times, the recent developments have made him feel like he’s living in a John Grisham novel, he said, referring to the best-selling crime novelist.

On Thursday, Woodford met with police and prosecutors to pass on information and assist their investigation. Woodford said he was satisfied that authorities appear to be thoroughly tracing the history of the financial transactions, while also looking at the bigger picture.

“The important thing is to follow the money and see where it leads,” he said, noting that the parties involved, including auditors, should be questioned over the flow of the irregular funds.

The Olympus scandal may also indicate the extent to which Japanese companies are operating according to their own set of corporate governance rules, Woodford said. “I hope Olympus is an exception.”

He also suggested certain business practices that are unique to Japan, such as cross-shareholdings, could even be holding back Japan’s economy.

Olympus has come under intense scrutiny since Woodford last month drew attention to the company’s use of creative accounting since the 1990s to disguise investment losses with enormous advisory fees related to mergers and acquisitions, and massively inflated acquisition prices.