By Chris Cooper and Mariko Yasu - Nov 23, 2011 4:19 PM GMT+0700
Nov. 23 (Bloomberg) -- Olympus Corp. former President Michael C. Woodford left London last night and returns to Japan today for the first time since he was ousted last month, setting up a showdown with the fellow board members who fired him. Woodford left Japan Oct. 14, the day he was axed for questioning $1.4 billion in takeover costs now at the center of criminal investigations. The Briton is due to land in Tokyo this afternoon. Susan Li reports on Bloomberg Television's "First Up." (Source: Bloomberg)
Olympus Corp. former President Michael C. Woodford landed in Japan for the first time since he was ousted last month, setting up a showdown with the fellow board members who fired him.
The Briton walked into Narita airport’s arrival hall about 4.45 p.m. today, where he was surrounded by dozens of reporters and cameramen, with about half a dozen police officers to control the crowd. Woodford left the country Oct. 14, the day he was axed for questioning $1.4 billion in takeover costs that are now at the center of criminal investigations, including whether some of the money was paid to Yakuza gangsters.
Olympus called a board meeting Nov. 25, setting up a showdown between its first foreign president and directors who cited his management style when they unanimously voted to dismiss him. Since then, the company has admitted former Chairman Tsuyoshi Kikukawa and senior aides colluded to cover up losses, leading to calls for Woodford’s reinstatement.
“Olympus needs to rebuild its creditability given the financial scandal and confidence given the leadership reshuffles, and Woodford looks to have both,” said Gavin Parry, managing director of Hong Kong-based brokerage Parry International Trading Ltd. The board members “are still ultimately answerable to shareholders, with many shareholders voicing their support for Woodford’s return,” he said.
‘Many Tentacles’
The stock of the 92-year-old camera and endoscope maker has slumped 65 percent since Woodford was fired, on concerns about the scale of the losses, the threat of delisting and continuing criminal investigations. Olympus has risen 89 percent since Nov. 11 as investors bet the problems would be contained. Japan markets are closed for a public holiday today.
Woodford will press the board to carry out a forensic investigation of the accounting on past acquisitions, he said in an interview this week. The agenda for the meeting is confidential, said Tsuyoshi Kitada, an Olympus spokesman.
“The Olympus story has many tentacles, like an octopus,” Woodford told reporters at Narita airport. “I feel optimistic that I can get reassurances that the issues involved will be investigated right through to their conclusion.”
He was then escorted to a chauffeur-driven Teana saloon, manufactured by Nissan Motor Co. (7201), whose president, Carlos Ghosn, is among a handful of foreigners running publicly traded Japanese companies.
Covering Up Losses
Kikukawa and Woodford both remain on the board, along with company auditor Hideo Yamada, who offered to step down over the scandal, and Executive Vice President Hisashi Mori, who was fired. None of them have made public statements since newly installed President Shuichi Takayama said Nov. 8 the three were involved in covering up losses.
After being fired, Woodford went public with concerns he raised with Kikukawa and Mori over $687 million paid in advisory fees in the $2.1 billion acquisition of U.K. medical company Gyrus Group Plc and writedowns of stakes in three other takeovers. That money may have been rerouted to Olympus via offshore funds to help cancel out losses on securities investments dating back to the 1990s.
Other senior executives involved in the transactions and in hiding their true cost from investors, including current head of investor relations Akihiro Nambu, remain at the company and no other directors have admitted any failure of duty.
Olympus’s biggest shareholder, Southeastern Asset Management Inc., said Nambu’s department lied in an e-mail exchange last year about the fees and that all executives at the company involved in hiding losses should go.
Weak Objections
“Any objection for Woodford coming back is getting weaker and weaker and weaker as this thing gets stinkier,” said Josh Shores, a London-based principal for Southeastern.
Woodford said he is hoping to win his role back. “That’s one of the reasons I’m coming now, to demonstrate that I’m prepared to come to Japan,” he said in a Bloomberg Television interview in his car on the way to Heathrow airport in London.
The decision to hire Axes America LLC as Olympus’s financial adviser for the Gyrus acquisition was approved by the board, which left no clear record of the decision-making process, according to a PricewaterhouseCoopers report commissioned by Woodford before he was fired.
The financial advisory agreement, the terms of which led the fees to blow out over the course of two years, was approved by Kikukawa in 2007. The decision to issue $200 million in preferred shares to Axam Investments Ltd., a now-defunct Cayman Islands fund, as part of advisory fees was decided by the board in September 2008, according to the report.
Long Heritage
Olympus was formed in 1919 as a maker of microscopes and thermometers. The company then expanded into cameras in the 1930s and began developing endoscopes in 1949. By the year ended March 2011, medical systems accounted for 42 percent of overall revenue (7733), Olympus’s biggest division.
The company sought deals “as part of its efforts to accelerate growth in medical equipment as well as to reduce dependency on endoscopes,” President Takayama said last month. “The acquisition of Gyrus and the three Japanese companies were part of such a plan.”
Olympus paid a total of 73.4 billion yen ($953 million) for Altis Co., News Chef Co. and Humalabo Co. between 2006 and 2008. In March 2009, the company wrote down a total of 55.7 billion yen in the value of those companies, or 76 percent of the purchase price.
Organized Crime
Woodford, who met the intelligence team at Britain’s Serious Fraud Office, will meet officials at Japan’s Securities and Exchange Surveillance Commission and the Tokyo District Public Prosecutors Office, he said this week. Japanese investigators are looking at whether Olympus worked with organized criminals in transferring the funds, the New York Times reported, citing a memo from law-enforcement officials.
An independent committee set up by Olympus to investigate its accounting said this week that it had found no evidence of criminal involvement. Woodford said it wasn’t possible to reach that conclusion without a forensic inspection of accounts.
Tokyo Metropolitan Police will provide Woodford with a security detail.
Following his three-day visit to Japan, Woodford travels to the U.S. to meet the Federal Bureau of Investigation, Department of Justice and Securities and Exchange Commission.
To contact the reporters on this story: Mariko Yasu in Tokyo at myasu@bloomberg.net; Chris Cooper in Tokyo at ccooper1@bloomberg.net
To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net
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