Olympus Has Fallen – Or Has It?

In October 14, 2011, Michael Woodford was fired from the position of chief Executive Officer of Olympus after only being appointed to the position two weeks earlier on September 30, 2011.  Mr. Woodford was fired after he uncovered accounting discrepancies which covered up massive investment losses by Olympus Corporation.  The reports of the fraud and the risk of being delisted from the Tokyo Stock Exchange resulted in an 82% drop in the company’s shares between October 13 and November 11, 2011.

On July 3rd, of this year, the Tokyo District Court in Tokyo, Japan convicted former Olympus chairman Tsuyoshi Kikukawa and two executives for violating securities laws and falsifying financial statements that hid losses of $1.2 billion (117.7 billion yen) since the 1990’s.

7.16.13The conviction followed the arrest in Tokyo, Japan of seven people back in February of 2012.  Of the seven arrested three were former Olympus executives, Mr. Kikukawa former chairman, Hisahi Mori former Executive V.P, Hideo Yamada, former internal auditor. Two were former Nomura bankers, Akio Nakagawa and Nobumasa Yokoo, and two others, Taku Hada and Hroshi Ono, were described as banker’s associates.

Another key player, former Commerzbank AG Vice President Chan Ming Fon, was arrested on December of 2012, by the FBI, in Los Angeles, California.  Mr. Fon is a citizen of Taiwan who lives in Singapore and was arrested for his participation in the scheme to defraud investors and auditors by misrepresenting financial condition of Olympus Corporation from 2004 to 2010.  Mr. Fon was indicted on January 17, 2013 and was granted bail later that month to a tune of $5 million dollars.

The recent conviction meant a court ordered prison term of three years to Mr. Kikukawa and Mr. Yamada, and two and half years to Mr. Mori.  The prison term is suspended up to five years which means they will not do jail time.  Olympus Corporation was fined $7 million (700 million yen) and avoided being delisted by filing corrected earnings for the previous five fiscal years.  There has been no further information on the indictment against Chan Ming Fon.

Despite the scandal that caused the stocks to plunge by 82% in 2011, today the share price is one-quarter higher than it was before the deception was discovered.  Still, there remains scrutiny on the obscure companies Olympus acquired in Japan from 2006 to 2008 for a total of almost $800 million. The companies included Altis, a medical waste recycling company, Humalabo, a facial cream maker, and News Chef, which makes plastic containers.  All three companies were unprofitable and had little in common with Olympus’s main lines of business, which are cameras and medical equipment.

Olympus currently controls about 70% of the global market for gastrointestinal endoscopes.  Olympus also manufactures ultrasound, electrocautery, endotherapy and cleaning & disinfection equipment, microscopes and industrial related systems.  Olympus has said it will raise up to 118 billion yen ($1.17 billion) in new share issues to expand medical equipment business and rebuild its financial health.  They intend to do this by offering shares to overseas investors, mainly in the US and Europe.

At MD Buyline, vendor transparency is important to us and our members.  Any effects this situation may have on purchasing practices or the quality of products from Olympus will be closely followed.

 

Maria Hernandez, MBA, BSMT (ASCP)
ABOUT THIS EXPERT
Maria Hernandez, MBA, BSMT (ASCP), Clinical Analyst — Ms. Hernandez is a laboratory professional whose background includes more than 18 years in the healthcare field. She has clinical experience in operations, physician office, hospital and ambulatory laboratory settings. She brings with her comprehensive knowledge of regulatory compliance, facility activation and relocation, LIS/EMR administration, medical coding and expertise in oncology and hematology. Ms. Hernandez is board certified by the American Society of Clinical Pathology as a Medical Technologist. Ms. Hernandez graduated from Texas State University with a Bachelor of Science in medical technology and earned a master’s degree in business administration from Amberton University.