What Michael Woodford Saw at Olympus

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Michael Woodford, English born, started as a salesman at the iconic Japanese optical equipment maker Olympus, and worked his way up the company ranks through perseverance and good business to last year become the first non-Japanese president and CEO of the conglomerate. But his Horatio Alger-like rise was cut short.

Within months after rising to the top, he was alerted to an article alleging fraud at Olympus that had appeared in a Japanese newsmagazine called Facta. The magazine alleged that Olympus, which reported ¥848.5 billion in sales for its 2012 fiscal year (or about $10.7 billion) had spent close to a billion dollars for three companies that had a fraction of their purchased value and that accounts had been massively falsified. As he began to dig deeper, he uncovered a massive accounting fraud of close to $2 billion. When he demanded the former management resign and take responsibility he himself was ousted. Instead of retreating to the Bahamas on a golden parachute, he blew the whistle.

So far as authorities unravel the financial cover-up seven people have been arrested in Japan last Febraury, including Olympus' chairman until the scandal was revealed Tsuyoshi Kikukawa. And this morning the F.B.I. made the first arrest outside Japan, taking a Singaporean banker into custody in Los Angeles. The U.S. Attorney in Manhattan, Preet Bharara, alleged in a release that Chan Ming Fon, who is a Taiwanese citizen, was paid $10 million "to play an international shell game with hundreds of millions of dollars of assets in order to allow Olympus to keep a massive accounting fraud going for years, duping its auditors and its shareholders."