Just a few days ago, Caleb asked why anyone would care if Olympus fired KPMG after a dispute over an accounting matter, but early this morning we learned the answer to that seemingly obvious question.
The question now is, why did KPMG wait around to get fired and not run the hell out of there? Well, because the issue at hand at that point was “goodwill impairment,” which ended up being a series of $1 billion transactions that added up to possible fraud. We won’t say total fraud because Japanese regulators haven’t had the chance to dissect the evidence yet. We can only assume KPMG did not notice that glaring $1 billion error or surely they would have alerted the financial authorities. No, dismissed “quietly,” swapped out for Ernst & Young. Like Uncle Ernie needs this heat right now.
Fine. Now we’re at tonight (here, at least) and WSJ is live-blogging the press conference at which Olympus’s new president suffered a media grilling over revelations that the company used phony mergers to hide investment losses from shareholders.
“I was absolutely unaware of the facts I am now explaining to you,” new CEO Shuichi Takayama told the press conference. “The previous presentations were mistaken.” Right. First thing you do in this situation is CY-MFing-A, bro.
The Japanese medical equipment and digital camera maker admitted to using acquisitions to cover its securities losses going back to the 1990s. Think about that for a moment. Many of you weren’t even aware of the world around you in the 90s, that was a long fucking time ago. So much for confidence in fragile financial markets.
It wasn’t that long ago that Olympus fired its British CEO Michael Woodford. Takayama had to answer more than a few questions about Woodford at his press conference:
There is a question about Mr. Woodford. “There are no plans for him to return,” Mr. Takayama said.
A reporter asking why the company is not thinking about revoking Mr. Woodford’s dismissal.
Mr. Takayama said Mr. Woodford was dismissed for his management style and therefore, there is no thought of revoking that dismissal.
A reporter asks Mr. Takayama if his impression of Mr. Woodford has changed in light of the revelations, his response: “No, it has not.”
It’s very interesting how they are holding the line against Mr. Woodford. It almost seems personal.
It couldn’t possibly stem from a feeling of betrayal and anger! A 20-year-old (alleged) fraud is suddenly trotted out into the 24-hour Internet news cycle (they didn’t have that in the 90s when they started this scam) and these guys have to apologize to shareholders because this asshole went sniffing around their completely obviously fake M&As.
“It is truly extraordinary and frankly unbelievable that Olympus, a major Nikkei listed public company, made a series of payments approaching USD 700 million in fees to a company in the Cayman Islands whose ultimate ownership is still unknown to us, preventing the auditors from verifying that no related parties were involved,” Woodford wrote in an Oct. 11 letter. “In putting the company first, the honorable way forward would be for you and Mori-san to face the consequences of what has taken place, which is a shameful saga by any stretch of the imagination.”
Woodford hired PwC, who wrote a damning report exposing Olympus’s shady M&A activities. PwC spokesman Derek Nash said he “could neither confirm or deny” that the firm had done any work for Olympus.
Fuck! When will these whistleblowers stop?
The good news: plenty of work coming up for you, GC faithful.