Olympus: The Story of a Whistleblower CEO

Michael Woodford, former CEO of 96 years old japanese Olympus, became one of the world’s most famous whistleblowers a few weeks ago after going public with accusations of massive accounting fraud.

Mr. Woodford, a British citizen, was the first non-japanese CEO of Olympus and had been with the company for over 30 years. Within weeks of noticing something was wrong with Olympus’ accounting, due mostly to a little-known Japanese magazine, Mr. Woodford vocalized his concerns. The magazine article raised questions about advisory fees of $687 million paid in 2008 for the purchase of Gyrus, a UK medical instruments firm. The article also questioned the $773 million paid for three small Japanese companies. In short, the article alleged a $1.4 billion cover-up and accounting fraud, a figure more than three times Olympus’ 2010 profits.

Mr. Woodford began inquiring about the articles’ allegations to Olympus’ former president, Mr. Kikukawa and to Mr. Kikukawa’s right-hand man, Mr. Mori. Mr. Woodford realized something was wrong.

Mr. Woodford blew the whistle on September 23 by writing an eight-page letter of concern, reflecting issues from the magazine story and sent it to Mr. Mori, copying the entire Olympus board. It then escalated into an “e-mail war”, according to CNN, which led Mr. Woodford to send various additional letters to Mr. Kikukawa.

Instead of responding to Mr. Woodford’s requests, the Board attempted to silence him by giving him the title of chief executive officer, which Kikukawa had held on to previously, effective October 1. Later on, Mr. Woodford informed Olympus’ auditing firm Ernst & Young of his financial concerns as well as ordered an independent report from PricewaterhouseCoopers.

A week letter, report in hand, Mr. Woodford sent his final e-mail to the board, attaching the report and asking for the resignation of Mr. Kikukawa and Mr. Mori. Instead, on October 14, the Board of Directors decided to fire Mr. Woodford as CEO.

In large part, because Mr. Woodford blew the whistle on Olympus’ financial fraud the company lost 75% of its stock value and is under a December 14 deadline to refile financial statements to the Tokyo Stock Exchange or it will no longer be able to trade.

Mr. Woodford formally retired on November 30 from the position he previously held on the Olympus board.