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Olympus: The New Enron?

Written and Edited by Anonymous

“Cheese!” “Click, snap, click”. Many of us today should know or have heard about a Japanese camera company called “Olympus.” Though not the biggest player in the camera market, the company is still prominent in the U.S. Market, and has recently been engulfed in numerous ethical complications. It seems that similar to Enron, the energy company which became bankrupt following a very large scandal, Olympus has also been altering its accounting books. However, although not completely bankrupt or as fraudulent as Enron, the company is in great trouble, for what looks like, may be a long haul.

Just recently the Japanese corporation admitted that it has covered up its investment losses for decades, by using a series of acquisitions to “balance their book”. According to Kana Inagaki and Phred Dvorak of the Wall Street Journal, this admission of Olympus “exposes one of the biggest and longest-running loss-hiding arrangements in Japanese corporate history.” As a result of this confession, curious deals made by the company have been brought to light. These deals consist of billions of dollars in payouts made by indefinable Cayman Island funds. Prior to this controversy, Olympus had explained these payouts as advisory fees and payments to purchase shares in small firms. Obviously, this was a LIE.

According to the Wall Street Journal, Olympus’ loss hiding dates as back as the 1990s. Back then the company had cleared up losses on investments by writing them off and channeling money through funds from controversial deals. These controversial deals arise with the acquirement of an English company, Gyrus Group PLC, and three small Japanese businesses by Olympus. Also, the company’ cover up in the 90s and even at present could be seen as a practice known as “tobashi”, which means “hiding bad loans, or selling unwanted stock”. Back in the day, when Olympus sold faulty assets and loans using the tobashi method, Olympus was able to keep their losses out of their financial statements. Another technique they were able to manipulate was a series of transfers between clients so that losses, once again, would be invisible in the financial reports.

Reading this case sounds really familiar, because many of the techniques used by Olympus remind me greatly of the fraud that became Enron. Similar to Olympus, Enron also tried to look profitable by their acquisition of Portland General Electric. Additionally, the way in which Enron participated in selling oil barges to and from Merrill Lynch indicate that by selling and buying back their oil barges, Enron was able to hide information on their financial reports for a brief period of time. This is fairly comparable to something that Olympus strived to do—hide their losses.

Confirmed by the president of the company, Shuichi Takayama, Olympus acknowledges that they participated in “inappropriate accounting”, something Enron also did extremely well. Also similar to Enron, the Company’s leaders have displayed a great deal of unassigned dependence and diffusion of responsibility. As seen with Enron, many of the executives such as Jeffrey Skilling, Ken Lay, and Andy Fastow tried greatly to appear oblivious of the problems, and once the problems became evident, tried to make sure that they were not to be blamed. The Olympus Corporation is also seen to bide by this trend, since all of the officials also blame each other, and proclaim that they were unaware of the faulty accounting. In addition, as a result of this controversy, the Olympus stock has taken a big plunge down about 70% to around $9.40, their lowest stock price since 1995. Not unlike the Enron stock which continued to decline until it officially flat-lined.

After the disaster with Enron, it would seem that corporations would learn to keep up ethical activity. Evidently though, they still do not learn. The actions of Enron’s management were by far extremely unethical, not to mention, ILLEGAL. Similarly so, Olympus management is no better in playing by the rules. Corporate greed, and desire to display high performance has deviated the Olympus Corporation as it did with Enron. Furthermore, since Olympus has not yet suffered through the well-deserved fate of Enron, it is possible that perhaps they can succeed once again. This can occur only if management acknowledges past errors, and decides to move forward with attention to ethical standards, especially those which concern accounting. If they cannot do so, management might as well start digging the Olympus Corporation’s grave, because the company won’t last long.

Although they are from two different worlds, both Olympus and Enron have acted in ways that are extremely similar. Their actions have not only been treacherous for their shareholders, they have also impacted the Wall Street community in constantly displaying corporate greed and immoral behaviors by corporations. Therefore, after this bump in the road Olympus must decide to either prosper once again, by fixing its philanthropy and attracting shareholders and increasing public perception, or becoming extinct like the giant that used to be Enron.

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**Due to technical difficulties we recently had to switch domains and transfer all of our website content.  Please keep in mind that while we have been publishing articles for two years, the published dates shown may not reflect the initial publish date.

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 Inagaki, Kana, Phred Dvorak, and Shawn Schroter. “Olympus Admits to Hiding Losses – WSJ.com.” Business News & Financial News – The Wall Street Journal – Wsj.com. N.p., 8 Nov. 2011. Web. 15 Nov. 2011.

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