On 14th October 2011, the Japanese technology giant, Olympus Corporation (“Olympus”), unexpectedly parted company with its CEO, Michael Woodford. He had been in the position for a matter of weeks.
Over the following months, one of the largest corporate accounting scandals in history unraveled. It transpired that Olympus had incurred billions of dollars worth of losses on investments dating back to the mid-1980s. In the 1990s. accounting standards changed, requiring those bad investments to marked-to-market. The resulting, accrued losses were taken off balance sheet, via a variety of devices, in a so-called Tobashi Scheme. (“Tobashi” means “flying away” in Japanese) The losses remained off balance sheet until they could eventually be brought back onto the books and eliminated.
Shortly after the scandal broke, Olympus commissioned an internal investigation and, by the end of 2011, had filed five years’ worth of corrected accounts. By the end of September 2012 – that is, within one year of the matter first hitting the headlines – the corporation itself, together with three of its former executives (including a former Chairman), had pleaded guilty to charges brought before the Tokyo District Court. The speed of resolution of the criminal proceedings in Japan reflects a pace of justice which English fraud lawyers can only envy.