Posts Tagged ‘Michael Woodford’
Daylife/Reuters Pictures used by permission
If you happen to be a connoisseur of accounting scandals, then the past month or so has been about as good as it gets, capped by the unfolding disaster at Olympus Corp. On the flip side, if you work as an auditor for a big accounting firm, it just got that much harder to make the case that society should value your services.
The scam at Olympus was simple, even if the means were sometimes exotic. The Japanese maker of cameras and endoscopes hid losses by treating them as assets. It says it had been doing so since the 1990s. This might have stayed under wraps had Olympus’s chief executive, a Briton named Michael C. Woodford, not pressed the matter internally in response to a Japanese magazine story this summer about some of the company’s more unorthodox dealings. Olympus’s board responded by firing Woodford, who was just six months into the job.
Now it turns out his warnings about the company’s finances were right. Where were the auditors? While we still don’t know the full extent of what they knew and when, just looking at who the outside auditors were is fascinating in itself.
Olympus’s auditor in the 1990s was the Japanese affiliate of Arthur Andersen, then one of the so-called Big Five accounting firms. After Andersen collapsed in 2002, KPMG acquired its Japanese practice, which operated under the name Asahi & Co., and took over Olympus’s audit. KPMG remained the auditor through 2009. Olympus switched to Ernst & Young later that year.
Viewed that way, it seems the ghosts of Andersen may still be with us. It was indicted in 2002 over its conduct as auditor for Enron, the failed energy trader, in what was the equivalent of a death sentence. Afterward, big-time accounting frauds turned up at many of the firm’s former clients — names that included WorldCom, Dynegy, Qwest, Freddie Mac and Refco. Olympus seems on its way to joining that list. It just took about a decade longer for the problems there to surface…
So many large companies have blown up after getting the all-clear from a Big Four accounting firm that many people regard auditor opinion letters as a joke. The client pays the auditor, after all. (Gee, no conflict there!)…
The biggest fear for the Big Four cartel should be that someday investors will become so fed up that they demand the status quo be chucked entirely, figuring they’ve got nothing left to lose. We’re not there yet, but give it time. If the auditing profession can’t figure out a way to re-instill value in its most basic product, even terrible solutions may start to look like drastic improvements.
My headline up top? Make Michael Woodford a citizen — put him in charge of the SEC — is how Jonathan Weil started off his guest spot on Pimm Fox’s Taking Stock show on Bloomberg TV, yesterday.
I’ve been following Woodford’s plea for honesty since he went public with his first statements questioning the books at Olympus. I hope he eventually gets a bundle from that particular batch of crooks. And I’d love to see someone like him whipping the SEC into living up to its charter.
Daylife/Reuters Pictures used by permission
Sacked Olympus chief executive Michael Woodford says he has contacted the UK’s Serious Fraud Office about the Japanese firm’s accounting practices.
Mr Woodford, who was dismissed last week, told the BBC that he believed the camera-maker had paid out excessive sums in relation to takeover deals. He says he was fired for raising the issue, but Olympus says his different management style was to blame.
The SFO confirmed that Mr Woodford had contacted it.
Olympus said it would “consider” taking legal action against Mr Woodford for disclosing confidential information.
Mr Woodford said he had commissioned auditors PricewaterhouseCoopers to look into an alleged $687 million payment by Olympus to a Cayman Island company. He told the BBC that he was ousted after he distributed a copy of the PwC report on Wednesday night…
He says he was called into a board meeting on Friday at which the agenda had been changed. The only new item to discuss was his dismissal as chief executive with immediate effect, for which, he said, no reason was given.
After the board voted for his dismissal, he left the meeting and was followed to his office by a colleague…He was asked for the key to his flat, 51% of which he owned, and was told to get the bus to the airport as they had taken away his car…
According to Mr Woodford, auditors were unable to establish who owned the company in the Cayman Islands. He said questions still had to be answered: “To whom and for what did we pay this money..?”
A perfectly legitimate question within any legal corporate structure. Whether that structure is manipulated by officers dedicated to criminal pursuits is an entirely relevant question.
Sounds like Mr. Woodford asked that question. His dismissal is the only answer, so far.