Synopsis

Olympus executives lost ¥100 billion on speculative investments during the late 1980s, then hid the losses for more than 20 years using shell companies in the Cayman Islands. Shortly after Michael Woodford took over as Olympus’s president in 2011, he demanded a full investigation of suspicious transactions he didn’t understand. When Olympus’s board fired him, Woodford shared his suspicions with an investigative reporter from the Financial Times. The negative publicity caused a $4 billion drop in Olympus’s market value. Japanese authorities eventually arrested two top Olympus executives and charged them with violating Japanese securities laws.

Discussion Questions

1. How were Olympus’s executive able to conceal the company’s investment losses during the 1990s?
2. How did Olympus use its Cayman subsidiaries to make its losses “fly away”?
3. How was the Olympus fraud discovered?
4. What aspects of Olympus’s accounting might have alerted auditors KPMG AZSA and E&Y ShinHihon that losses were being concealed?

Additional Resources

Michael Woodford Interview. In this Bloomberg interview, Michael Woodford talks about events leading to his dismissal by Olympus’s board (6:27 minutes).

Inside the Storm: How Olympus Nearly Collapsed. A NewsAsia documentary about the Olympus accounting fraud (47:43 minutes).