1.7 Billion Dollar Fraud: Full Exposure Storyville

I felt scared.

And even telling you this now, my hands are cold and sweaty.

Every time I tell people what happened,

I can feel myself going back into that period.

I went into the boardroom,

a few minutes to nine and everyone was there.

They were talking nervously, louder than normal.

No-one would make eye contact with me.

The only person who wasn't in the room was Kikukawa.

I was feeling, you know, I'm not going to sit here

waiting for my execution indefinitely,

so I started looking at my watch in an exaggerated manner.

And Mori looked over to me

and he could see I was getting agitated,

and said to me, "Michael, it must have been very hard for you

"yesterday in Tohoku visiting the area where the tsunami struck."

I felt this overwhelming sense of revulsion and disgust at the man.

He knew what was going to happen and he would choose that subject?

To humour me, to distract me.

I said, "Mori." I dropped the San, the term of respect.

"Mori, stop it, stop playing with me.

"I know what you're going to do, get on with it."

He was shocked and scuttled off to go and get his master.

Who finally turned up at around 9:07 and he read out the resolution,

the first resolution, saying that Woodford will be stripped

of his presidency, his CEO status and as a representative director.

And before he had finished, all the directors around the table

put their hands up, and physically, pushing to the sky,

and it reminded me of children in a classroom,

and I was watching this behaviour of these men,

some of whom I've known for 30 years, acting like that.

In Japan, hardly anyone gets fired,

and not least you wouldn't fire the president of the company.

It's almost unheard of. Why were they acting like that?

They know that I'm going to not just take this,

so what were they scared of?

Something more scary than me going public.

Let's talk about Olympus.

It is a company best known for high quality cameras.

It is facing a potential scandal.

The company fired its president and CEO Michael Woodford

after he sent a letter to the company's chairman

urging the chairman to resign over "serious governance concerns."

CEO Michael Woodford was sacked after he questioned deals

that he said covered up huge losses.

They wrecked the company, by siphoning off huge amounts of money

on all this nonsense.

If Kikukawa believes thoroughly he is personally innocent

and was only doing right by the company, then I think that says

something very scary about Japan, or certainly about corporate Japan.

The Japanese people toil to build a new nation

under MacArthur's firm hand.

The Japan of tomorrow is being moulded on the streets of Tokyo today.

MUSIC: Even The Bad Times Are Good by The Tremeloes

I was called over for a meeting with Kikukawa.

I suspected he may be telling me who was going to be the next president.

I didn't anticipate it would be me

so I arrived at his office in the afternoon

and went through a few pleasantries and almost immediately he just said,

"Michael, I haven't been able to change this company.

"I think from what you've done in Europe and America and elsewhere,

"you could, and I'd like you to be the next president."

I just said yes.

And because I wanted to change the company, I wanted to do that.

I met Michael for the first time just after he was appointed.

It was a pretty obvious story for us to do.

A British newspaper, British CEO in Japan,

so I interviewed him at the office.

The record of the gaijin CEO in Japan is pretty mixed anyway.

Carlos Ghosn has probably been the most successful.

Renault became a major shareholder of Nissan.

He didn't need to build a power base.

Howard Stringer, less successful.

He was brought over from America,

didn't have the same kind of power base and he struggled.

With Michael, he was kind of a hybrid of the two.

He'd been at the company long time

so I thought that would give him some credibility.

I think a number of managers if they were in that position

and had the freedom to realise the potential of the medical business -

70% market share, wonderful intellectual property.

Olympus should be not just a good medical company,

it should be a company which can take on the Johnson & Johnsons

and the Covidiens, big American health care companies

and German health care companies,

and really use the endoscope business as a platform

to show Japan can be an absolute leader in health care equipment.

I think the fact that he couldn't speak Japanese

definitely contributed to his feeling of isolation.

And if he could speak Japanese,

he might have got a better sense of what was waiting for him.

I didn't, when I was made president,

anticipate that Kikukawa would retain the CEO position,

or create the CEO position, and if you run a company,

you have to have clear leadership,

and what he did, he created two heads.

I was the president and then he had this contradiction -

he was the Ceo.

I was in Hamburg and I received an e-mail from a Japanese friend

who was also a director of a leading Nikkei company.

He wrote to me and said, "Have you seen this?"

I didn't know what Facta was.

I'd never heard of it.

I was returning to Japan the following week

so I thought I would get to understand it properly,

get a full translation.

I came back with an anticipation I would walk into a boardroom

with a great tension and atmosphere.

What was shocking to me was everything was very normal

and mundane and people were very friendly.

"How was your visit in Europe, Michael?"

And I was disorientated to the extent of

the Facta article must be something meaningless.

I became blacker in mood as he went through it.

Monday, the office was normality itself.

Mundane, no-one's saying anything.

That afternoon, I was so anxious

I asked two colleagues who I trusted to come to my office,

Japanese colleagues, showed them the Facta article.

Both of them told me that they had been instructed by Kikukawa

not to tell Mr Woodford.

I was worried and after hearing that I was even more worried.

Why would the chairman of the company be telling my own staff

not to discuss things with me.

It was himself and Mori, it was a room with a very large boardroom,

so there was a table between us.

I'll never forget because he'd organised

a very large and elaborate plate of sushi, and where I was sat,

there was a tuna sandwich, which...

Everyone knew I loved sushi so,

it may be something to say,

"That's your position in the food chain, Michael.

"You're here and we're here. Don't forget it."

The first thing really was, "Why didn't I know?"

And Kikukawa answered.

"I give the instruction that this article shouldn't be brought

"to your attention or discussed with you.

"Because you're the president, because you're too busy,

"you have enough to worry about."

I challenged him and said, "I've just been to New York and Boston

"and London and Paris to see our overseas investors and potential investors.

"I interfaced with the Japanese shareholders and the president,

"people likely to raise this type of question with me. Why?"

He just...left it, and then I asked him, "Were the allegations true?"

And he said, "Some of them."

Mori was an intelligent man, quieter.

I knew he would know everything.

Said to Kikukawa, "Can I have a private meeting with Mr Mori because I need to understand?"

He reluctantly agreed.

I challenged and pushed him for answers,

the Gyrus payment of 700 mills.

He started to explain that this was to do with apreference shares

and I said, "Well, I don't understand, we bought the company outright."

There was no minority interest.

He just stopped talking.

I tried to lighten the mood slightly

and moved onto the acquisition of these three companies.

A mail order face cream company? Come on!

How are we going to compete with that? A plastic plates company.

Why would we buy a plastic plates company?

He wasn't prepared to go any further with me.

It was becoming clear.

I was asking reasonable questions which were being refusing to be answered.

I asked him who he worked for and I anticipated he would say,

"I work for Olympus" or "I report to you, Michael."

I will never forget his words, which were chilling.

He looked at me and his guard came down for the first time, really.

His anger came out.

He looked at me right in the eye and said, "I work for Kikukawa.

"I'm loyal to Mr Kikukawa."

I was in New York.

I was still drinking a lot because I wanted at night to try to sleep.

It was like a torment.

I don't know if you can imagine being the president

of a large company with 45,000 employees.

I felt this sense of responsibility

but here were these strange things which I could not find answers for.

It was around 3:30 New York time.

I looked out the window, the streets were quiet.

I didn't even turn on the lights.

I went to my laptop, I can remember the shimmering light,

you know, my eyes sticky and looking...

and there was an e-mail and in that e-mail, there was

a translation of the Facta article which had been published.

And that article gave a lot more detail of alleged frauds

and the term "antisocial forces", which is a euphemism,

as we know, for organised crime, racketeering, the yakuza

and I was scared and troubled.

New York was waking up

and everything was normal in New York as it always is.

Noise from the street, yellow cabs,

steam coming out from the pavements...

I was thinking, "What was going on at the monolith building

"in Shinjuku? You know, what was behind this?

"What are these people playing at?"

I came to the conclusion then and there that enough is enough

and I am going to formalise my concerns

and I'm going to write to the whole board, and then I'm going to start

asking the questions I want answers on the terms I wanted answered.

You know, who did we buy these companies for?

How did we value these companies? What due diligence was done?

Who assisted us? Who facilitated these transactions?

I didn't want anyone finding a way out, I wanted it to be,

"Here's the question, please answer it."

As the letters escalated, I made it clear as I was unhappy that I would

resign if I didn't get answers, I would go public,

that I was resigning because of governance concerns.

It started in the morning when I said I wanted to see...

It doesn't change my money or terms or anything, I wanted to have...

I said to Kikukawa, "This is a very complex, difficult situation.

"I need the authority to deal with it."

And Kikukawa's response was,

"No, Michael, the Japanese shareholders wouldn't accept that."

And I said, "Fine, I'll resign."

He got angry, Kikukawa, and started to shout at me.

I came right back and told him I wasn't one of his poodles.

He has two toy poodles

and has a screensaver with his poodles dressed up

in their little outfits, which is common here, as you know, in Japan.

It was understanding, really, the way he saw me.

He actually asked me in this meeting - did I hate him?

I was surprised he asked that question,

and I said, "No, I didn't hate him."

I could have been called anything, I could have been called God

and I couldn't have done anything because a board of directors,

would always be able to have a majority. And Kikukawa...

May have given away his CEO,

but he would be still pulling all the strings.

It was on the way back that night that I decided that

I would bring in PricewaterhouseCoopers to evidence

the fraud related to the payment of the 700 million

or a figure approaching that.

It was pretty condemning and it raised a lot of questions.

It was evident that this whole transaction needed to be

questioned and investigated and it would potentially be illegal.

Everything I did, I did in both languages and I sent by e-mail

and by DHL and that was where I pleaded for them not to put

the fact that I've was a foreigner, a gaijin, before the facts.

I begged them not to put their personal relationships

before what was right for the company.

It was a very moving day - as has been the case in the days

after the 11 March earthquake when I came back again. And...

..somehow I got a perspective

when I saw my colleagues clearing this paddy field to make it able

to be used to grow rice again and you see all these fragments of...

people's lives.

And they said to my colleague...

..a man of the same age as me with two children, and...

You know, we knew each other quite well.

Very professional. And I said, "I'm going to be fired tomorrow."

And, erm...

He just went quiet.

You know, I almost knew it was pointless,

but I wanted, ideally, to have one last attempt.

I was never given that chance.

I walk out of the boardroom and then my instincts are,

I've got to get away from this country. You know, I don't know what's going on, who is involved.

An amount of money approaching 2 billion, you know,

bad things have happened to people for a lot less.

So I went to the safe in my office

and I had 1000 or something like that in yen.

I had a picture of my family, a few personal things.

I just wanted to get out with those things, but particularly the stamp.

Kawamata in effect acted as the chief financial officer. Came in.

Kawamata smiled at me. This was gratuitous.

He was gloating.

You know, he was enjoying this.

First, he asked for my computers,

he knew I had two Sony VAIO computers and he wanted them back.

Now, those computers contained e-mails from senior executives

of Olympus from around the world, some of which were

very explicit in criticising senior management,

the people who had been working and helping me.

And I felt a huge responsibility to protect them.

And I said, "No, you can't have them.

"I know what you do, how you work.

"They've gone back to London securely.

"I will deliver the computers back to the British company

"when they'd been forensically wiped."

That made him angry and he said,

"Give me your phones, you have two phones." I had the iPhone.

I moved again towards him and I was feeling pumped up with anger

and frustration and my first was clenched.

I said, "My wife is worried."

"She's going to be worried, I need to phone her."

"Are you a policeman? Are you policeman?"

Is he going to physically take it off me?

And he backed off.

I thought, "I need to go somewhere safe," so I went

to Yoyogi Park, which is just a few minutes from my apartment.

I again tried to remember that I needed to think carefully what

I was doing. I felt at risk, I felt threatened.

I wanted to see somebody quickly.

I wanted to pass over the material I had again

in case something happened to me.

I saw a wire service report that Michael had been fired.

I thought, "That's strange, surprising."

I thought, "I should give him a call,"

and then my phone rang and it was Michael calling me.

He immediately said, "No, this is serious.

"There's a lot more going on than what they said.

"Money has disappeared, hundreds of millions of dollars has disappeared.

"This is a big deal and I want to meet you."

So I convinced him instead to meet me at a nearby cafe that

I knew would be quiet and wouldn't have many people.

I thought people might be watching him or following him.

I got there first and I was going into shock.

I knew that if you have shock, you give people a sweet drink, sugar,

so I ordered an ice coffee and I remember

pouring in a huge amount of sugar and drinking it quickly.

You immediately could see that he had something to back this up.

You know, this wasn't just a wild tale,

as soon as he put the binder there and started showing me...

We spent 45 minutes and I went through it. I said...

"You know," To me... he asked what I wanted and I said,

"I want this story on the front page

"and I won't talk to any other media."

It seemed to me that he had done a pretty thorough job

of researching and documenting the fact that money had left

the company and also how it had left the company

through these phoney or inflated acquisitions.

But the trail kind of stopped at the end of that.

It was still unclear who got the money

and that was the source of his fear.

Did gangsters have it?

Did his bosses steal it?

That at the time was still a complete mystery.

And then we left and I flagged down a taxi to Haneda.

I knew by that time all the flights to Europe had left Narita.

The first flight out was in two hours' or so time to Hong Kong,

which I knew I could connect to London and I started queueing up

for tickets for the Cathay Pacific flight.

So everything seemed to... You know, I was paranoid by that point.

And it wasn't until the engines were roaring as we left the runway

and tilted back in my seat that I started to feel safe.

Landed at Heathrow.

I was so exhausted, but filled with adrenaline.

My wife was there and she saw me and put her arms around me.

It felt very, very good to be with her.

She had bought a copy of the Financial Times.

There on the front page was the story.

When I switched on my mobile, it beeped crazily

and the Wall Street Journal and New York Times,

everyone was leaving messages wanting to speak with me.

I was just totally...

..consumed with a sort of sadness and...

a sense of unease of what the future was going to play out.

Now, six months ago,

he became the company's first ever non-Japanese president.

The board of the camera conglomerate Olympus was so impressed

that just two weeks ago, they made him Chief Executive as well.

Then quite suddenly,

after Michael Woodford had uncovered alleged accounting

irregularities among the company's finances, everything changed.

As CEO, one would think you'd be able to go directly

to the people who co-ordinated the deal.

-What responses were you getting at the time?

-Totally evasive.

The question still hasn't been answered - for what?

For what and to whom?

And why would you pay to people you don't know who they are?

You can't then establish if there is any related parties

which raises all the issues which are now circulating in Japan

about corruption, links to antisocial forces.

Two seconds here, is Olympus at this point saying they may sue you?

Yes, I would be delighted for them to sue me in the High Court.

There is a public interest story here.

Let the facts come out, let all the facts come out. I'd be delighted.

-All right.

-I'd be delighted if they did that.

Japanese companies have long been criticised for their cosy,

insider corporate culture.

The Japanese themselves say that change is difficult

without something called gai-atsu,

which literally translates as pressure from foreigners.

It was 12 days in.

I was in New York visiting the FBI with my wife.

We arrived very late, went to bed exhausted.

After three hours, the phone started beeping.

My wife looked and said to me, "Kikukawa has resigned."

Kikukawa resigning really was, you know,

the edifice was starting to crack.

It was starting to crumble. It took 12 days to drive him down.

Japan had been attracting funds on some levels

because people were seeing it as a kind of safe haven

from the European crisis and so forth.

And now suddenly,

the integrity of Japanese companies, the integrity of the markets,

the integrity of financial reporting, was being questioned in a big way.

Japan was now awake to the story.

And when I landed at Narita there must have been 20 camera crews

and 70 journalists. I'd suddenly become a rock star, you know.

I'm prepared to go back. If the Japanese shareholders don't want me

because I've been somebody who's not been harmonious,

because I've shaken the tree and caused waves.

But the truth of what I was saying has come out.

That would be a very sad statement to the world,

that Japan hasn't changed.

I wanted to come back

because I wanted to challenge Kikukawa, I wanted to look him

in the eye as a human being,

I wanted him to know what I felt and what harm he was doing.

A fascinating situation to observe, the fired gaijin ex-president,

still a director, going back to face the board who had ejected him.

It was strange going back,

because I saw people I knew and many of them smiled at me.

In a way, the meeting was a lot less tense than it would have been

because Kikukawa, Mori and Yamada weren't there.

The board are all contaminated. Absolutely.

They have made these decisions and then they have this huge file,

PWC report, and they still don't act.

All of them have to go. All of them have to go.

APPLAUSE

CLAPPING

Good evening. It is a day that will be in bold print in history books.

Black Monday, October 19th, 1987,

when the stock market went into a freefall,

losing more in one day than it did on Black Tuesday in 1929.

STOCK MARKET BELL

The walls came tumbling down on Wall Street Monday,

as two financial giants, Merrill Lynch and Lehman Brothers

buckled under the real estate and credit crisis.

We have overcome tough challenges before

and we will overcome this one.

Democratic capitalism is the best system ever devised.

SPEAKING IN JAPANESE

So, I had agreed with those two shareholders that I would be

prepared to meet with Mr Takayama,

that I would be prepared to do that.

Work together, avoid a proxy fight.

That's only damaging, that's only harmful, that's only wasteful.

Show some dignity, do the right thing for this company.

If he wants to meet to try to solve

this in a constructive and non-combatitive way,

then I am more than willing, I hold my hand out.

Of course he has to leave because of what he failed to do.

It would be a positive way. I still remain hopeful that he will do this.

However, if he doesn't, then I will fight for this company.

Then it will be the time to fight.

I hope we can avoid it, but if necessary I am prepared.

So, Mr Takayama, you won't speak to me, but if you're a leader,

then stand up like a man and go on the programme yourself

and ask and answer, not with greyness and no comment,

you answer to the employees and let the employees vote

after your hour and a half.

So, Mr Takayama, you go on Nico Nico now. I've done it. You do it.

I asked at a public televised meeting to meet with Kunibe,

the President of SMBC.

He wouldn't even speak to me.

So Japan works as a club, corporate Japan works as a club,

but it's perverted and it's distorted

and it's destroying this country.

I don't think he had a good sense of some of these bankers

when he met them while he was president.

You know, he would always meet them in the company of Kikukawa

and the bankers would address themselves to Kikukawa

and I think in those meetings, it was really brought home to Michael

just how marginalized he was in terms of the Japanese business world.

Nobody really saw him as being in charge.

I was on a small island called La Gomera in the Canaries.

It was New Year's Eve.

Nuncy was again continuing her point that the Japanese shareholders,

"They're not supporting you,

"you can't win without the Japanese shareholders.

"Stop." You know?

The samurai were the Japanese colleagues I was working with

who continue to support me, would have literally died for me.

You know, they cared so much for the company.

And then these weak, spineless,

cowardly, malicious, vindictive...

And this was cloaked in a guise of, you know,

"We didn't know what was going on."

-REPORTER:

-'Three former executives

'of the disgraced Japanese Olympus Corporation have been arrested

'at their homes by prosecutors

'over their role in the disgraced Olympus company's

'US 1.7 billion accounting fraud.'

That's the man I'd really like to talk to the most

in this whole case, is Kikukawa.

Because I think his mindset, his reactions

and what he really thinks, if you could pull that out of him,

that would tell you a lot about Japan.

The most important thing for him was himself.

I saw him in meeting after meeting. He cared for himself.

He was a vain, deluded egotist.

And he damaged the company.

He wanted to be the important emperor.

He wanted people bowing to him.

He was ugly, ugly, ugly.

If he truly thought he was doing it for the sake of the company,

then the one thing it shows about Japan is that responsibility

is diffuse to the point of being meaningless in many cases.

You know, this package of secrets and mistakes

and misjudgements gets passed from person to person.

No-one really opens it.

They just hold it for a while.

And they can claim that they have no ownership of it, no responsibility.

They're doing it...

for everyone.

For the people who came before them.

It's not really my story,

it's a story about modern corporate day Japan,

and much broader than that, it's about Japanese society.

Companies and the way corporations work

is just part of the overall society.