The admission by Olympus Corp., a major maker of cameras and endoscopes, that it has covered up investment losses since the 1990s damages not only the firm but also the image of corporate Japan.

It is all the more regrettable that the financial wrongdoing, which has become the target of a criminal investigation by the Metropolitan Police Department, was committed by a 92-year-old company known for its technological prowess and enjoying a more than 70 percent share in the global market for endoscopes for digestive organs.

It is suspected that at the peak of its deception, Olympus concealed losses amounting to some 130 billion yen. The firm could be delisted from the Tokyo Stock Exchange.

Japanese companies cannot be too careful in their behavior because the scandal has led mass media abroad not only to level criticism at Olympus but also to voice suspicion of the corporate culture and corporate governance of Japan Inc.

Olympus Corp. President Shuichi Takayama said Nov. 8 that the firm had hidden huge securities investment losses since the 1990s. It has become known that Olympus used an advisory fee paid to a company in the Cayman Islands over Olympus’ purchase in 2008 of Gyrus Group PLC, a British medical equipment maker, as well as funds to purchase three Japanese firms as a means of covering up the losses. It is suspected that Olympus used complicated schemes to camouflage its real financial conditions.

The advisory fee Olympus paid to the company in the Cayman Islands, a tax haven, reached some 66 billion yen. It is also known that Olympus spent around 210 billion yen to purchase Gyrus Group, some 58 percent more than its market value. The advisory fee was well above the usual 1 percent of the purchase price. Olympus also spent some 73.4 billion yen to purchase the three Japanese firms, much higher than their market value.

On Oct. 14, Olympus abruptly fired President and CEO Michael C. Woodford apparently because he had pointed out abnormalities involved in the acquisitions and the advisory fee. He served in those positions for less than six months.

It is hoped that the police, the Securities and Exchange Surveillance Commission, and the firm’s third-party committee will carry out a thorough investigation to find the whole picture of the wrongdoing.

(The Japan Times)