26 Oct 2011

Olympus chairman resigns amid payments scandal

The chairman of Olympus resigns after allegations of $687m worth of “improper payments”, but denies wrongdoing. Channel 4 News speaks to the man who first raised concerns over the payments.

Olympus Corp announced on Wednesday morning that its chairman Tsuyoshi Kikukawa – who is also the company’s president – has stepped down.

His resignation follows allegations that the company made $687m of “improper payments to unknown parties as part of an acquisition deal. The subject was first raised in the UK on 17 October in an interview on Channel 4 News with the company’s former chief executive Michael Woodford, who claimed he was sacked after raising questions over the payments.

Mr Woodford told Channel 4 News that questions still remained over the payments despite the departure of Mr Kikukawa – particularly because Mr Kikukawa’s replacement, Shuichi Takayama, continues to maintain that there was no wrongdoing.

In a press conference following Mr Kikukawa’s resignation, Mr Takayama confirmed that an independent task force to investigate the allegations about inappropriate payments would be established “as soon as possible”, as announced last week, but did not go into detail.

He said the company was working “day by day with sincerity and with all our hearts to resolve the problem”, but he also denied the allegations, saying that there was “absolutely no wrongdoing,” and adding: “I would say that the situation would have warranted those fees and thus they are appropriate.”

However Mr Woodford told Channel 4 News: “He is again saying exactly the same thing as Kikukawa was saying which is only going to engender more uncertainty, more concern. They need to answer that question. They can’t get off the hook.

“Financial journalists around the world are asking the same question: why did you possibly make a payment of that size and then pass the monies through the Cayman Islands to unknown parties? They have to answer it and until they do we won’t be able to stabilise the situation and allow Olympus to move forward.”

In a separate statement, Mr Kikukawa said that his resignation was an attempt to restore confidence in the company, and that he would remain a director.


Mr Woodford’s concerns centre around an “extraordinary” $687 million to unidentified advisers linked to a $2.2 billion acquisition of British company Gyrus in 2008. He has previously called for the whole Olympus board to resign and for an external forensic examination of the company’s accounts.

Mr Woodford, speaking to Jon Snow earlier this month, said that the huge fee was around 35 per cent of the acquisition price – when the normal fee to advisers is between 1-2 per cent.

Olympus has admitted it paid the $687m sum, but refused to name the financial advisers and said it did not know their whereabouts. Mr Woodford has identified them as New York-based Axes America LLC, and AXAM Investments Ltd in the Cayman Islands.

Mr Woodford claims he was sacked for raising questions over the payments, which is when Mr Kikukawa took over. Olympus said he was fired for failing to understand the company’s management style and Japanese culture. Following Mr Woodford’s allegations, Olympus’s share price has plunged by more than 50 per cent.

Investors remain cautious

Following the announcement, Japanese ratings agency R&I said that it had put Olympus Corp on watch for a possible downgrade because of questions arising over the “appropriateness” of fess for past acquisitions.

Southeastern Asset Management, the biggest non-Japanese investor in Olympus Corp, said that Mr Kikukawa’s resignation was “a step in the right direction” but called for a full and independent audit to restore the company’s reputation.

“This is a step, the company has admitted that there are critical questions that require immediate answers, and that is very positive,” said Josh Shores, a principal Southeastern Asset Management. “But if this (the fees scandal) is not addressed soon and drags on much longer, the chances are higher that those values could be impacted.”