Just another reminder that we haven't learned anything from Enron. The $1.7 billion accounting scandal surrounding Japanese camera maker Olympus continues to spin out of control, as accounting scandals do, with Reuters reporting that the entire board saying they'll step down. The company says it will also set up two expert panels to consider legal steps against those responsible for a huge loss cover-up scheme and to examine the responsibility of auditors. Olympus dominates the global market for endoscopes, imaging devices that are used for internal medical examinations. It also makes cameras. But you would have to wonder whether Oympus will be forced to sell off its assets.
This comes as a company commissioned report finds that Olympus management was "rotten to the core". The Financial Times reports how Olympus used a whole lot of Enron-style convoluted accounting tricks to get toxic assets off its books. "Stung by losses on investments it had made during Japan's late-1980s asset bubble, Olympus shifted the depressed assets off its books by selling them to "outside" funds that it secretly controlled. The report described how some $1.7bn flowed through shell companies and other financial entities in Singapore, the Cayman Islands, Europe and Japan. According to the report, the funds bought the assets using loans arranged by Olympus from banks including Commerzbank and LGT of Lichtenstein. Years later, Olympus used a series of acquisitions as cover to funnel money back to the funds to repay the loans."
So what happens now? Bloomberg reports that Olympus shareholders will be allowed nominate directors. Whether they can fix the company's culture of corruption is another question altogether.
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