Former Olympus boss asks the US$687m question
Source: Agencies |
October 25, 2011, Tuesday
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OF all the issues swirling around leaders of Japan's Olympus Corp, its ousted president and chief executive returns again and again to the US$687 million question.
"US$687 million," said Michael Woodford, his anger rising. "For what? And to whom?"
Woodford put those questions to the company's chairman, and was fired. Armed with a mass of documents, Woodford continues to wage a one-man campaign to find out what happened. The case has become a rare public clash between a substantial Japanese company and its former president.
Olympus has defended the payment as "appropriate" compensation to financial adviser Axes - paid through Cayman Islands registered entity Axam - for advice on the US$20 billion takeover of a UK company, medical instruments maker Gyrus Group, in 2008. Payments to advisers in takeovers are typically 1 percent to 2 percent of the price.
After first claiming the payment was nearer US$390 million, Olympus last week confirmed the US$687 million figure. It said it paid US$244 million for advisory services on the Gyrus deal, which included US$177 million in preferred shares in Gyrus. When Olympus later bought back the shares, the company said, the value had risen to US$620 million.
"And what for? There is nothing there," Woodford said. "They gave us a 'strategic look.' All they have done is put the names of five or six healthcare companies on a piece of paper."
Woodford's public questioning of that enormous sum has rocked the company. Shares in Olympus have lost half their value since Woodford was dismissed on October 14.
Woodford said. "They lied because they did not realize when I left I took electronic copies of everything, which are now with media organizations around the world."
Some of Olympus's shareholders have joined the agitation for answers.
Woodford, 51, worked for Olympus for three decades, initially at UK subsidiary KeyMed. Later, as executive managing director of Olympus Europa Holding, he was credited with raising profits in the region by cutting costs and restructuring.
In April, he became president of the company, a rare case of a Westerner at the top of a Japanese company.
When he was offered the presidency, Woodford said he saw Olympus as a company which "had been managed placidly in many ways." He said: "I had inklings that people were incompetent. I had inklings that things were not always managed as commercially as they should be."
He also thought Olympus had paid a high price for Gyrus, but heard about the US$687 million payment only in July, when Japanese financial magazine Facta broke the story.
When he returned to Japan in early August after a vacation, Woodford said he sought a meeting with company Chairman Tsuyoshi Kikukawa and group President Hisashi Mori to discuss the Facta article.
"As soon as I raised it, the atmosphere in the room changed markedly, and I felt very uncomfortable by the way they acted," Woodford said. "The allegations were serious and substantial. And I am the person who would have to sign the accounts. They were evasive. You could feel the utter resentment that I had raised this."
In September, Woodford said he was further alarmed when Facta published a second article connecting the Gyrus deal with "anti-social elements," allegedly a euphemism for organized crime.
In a series of six letters, Woodford said he made it clear he would resign if he did not get answers.
"I was drawing my own conclusions that this was inherently wrong, and we are going to need to bring in forensic accounting teams, completely independent of this management, to go through everything," he said.
"US$687 million," said Michael Woodford, his anger rising. "For what? And to whom?"
Woodford put those questions to the company's chairman, and was fired. Armed with a mass of documents, Woodford continues to wage a one-man campaign to find out what happened. The case has become a rare public clash between a substantial Japanese company and its former president.
Olympus has defended the payment as "appropriate" compensation to financial adviser Axes - paid through Cayman Islands registered entity Axam - for advice on the US$20 billion takeover of a UK company, medical instruments maker Gyrus Group, in 2008. Payments to advisers in takeovers are typically 1 percent to 2 percent of the price.
After first claiming the payment was nearer US$390 million, Olympus last week confirmed the US$687 million figure. It said it paid US$244 million for advisory services on the Gyrus deal, which included US$177 million in preferred shares in Gyrus. When Olympus later bought back the shares, the company said, the value had risen to US$620 million.
"And what for? There is nothing there," Woodford said. "They gave us a 'strategic look.' All they have done is put the names of five or six healthcare companies on a piece of paper."
Woodford's public questioning of that enormous sum has rocked the company. Shares in Olympus have lost half their value since Woodford was dismissed on October 14.
Woodford said. "They lied because they did not realize when I left I took electronic copies of everything, which are now with media organizations around the world."
Some of Olympus's shareholders have joined the agitation for answers.
Woodford, 51, worked for Olympus for three decades, initially at UK subsidiary KeyMed. Later, as executive managing director of Olympus Europa Holding, he was credited with raising profits in the region by cutting costs and restructuring.
In April, he became president of the company, a rare case of a Westerner at the top of a Japanese company.
When he was offered the presidency, Woodford said he saw Olympus as a company which "had been managed placidly in many ways." He said: "I had inklings that people were incompetent. I had inklings that things were not always managed as commercially as they should be."
He also thought Olympus had paid a high price for Gyrus, but heard about the US$687 million payment only in July, when Japanese financial magazine Facta broke the story.
When he returned to Japan in early August after a vacation, Woodford said he sought a meeting with company Chairman Tsuyoshi Kikukawa and group President Hisashi Mori to discuss the Facta article.
"As soon as I raised it, the atmosphere in the room changed markedly, and I felt very uncomfortable by the way they acted," Woodford said. "The allegations were serious and substantial. And I am the person who would have to sign the accounts. They were evasive. You could feel the utter resentment that I had raised this."
In September, Woodford said he was further alarmed when Facta published a second article connecting the Gyrus deal with "anti-social elements," allegedly a euphemism for organized crime.
In a series of six letters, Woodford said he made it clear he would resign if he did not get answers.
"I was drawing my own conclusions that this was inherently wrong, and we are going to need to bring in forensic accounting teams, completely independent of this management, to go through everything," he said.
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