The View from ACFE Japan on the Olympus Fraud Case

GUEST BLOGGER

Daisuke Wakiyama, CFE
President and CEO, D-Quest Inc., Vice President, ACFE Japan

The Olympus fraud case was and remains a very serious problem. Not only does it raise doubts about the transparency and soundness of the Japanese market, but it also raises questions about the reliability of the Japanese themselves. What’s devastating is not just the amount of money involved, but also the duration of the fraud -- and the fact that the whistleblower was not Japanese, but British.

Some may think, “A Japanese person would take part in fraud, but a British person would not” or, “A British CEO revealed fraud; a Japanese person could not do so.” This impression may stir a sense of distrust of the very character of all Japanese.

As you may be aware, Olympus, the global manufacturer of medical equipment with a market share exceeding 70 percent, avoided being delisted from the Tokyo Stock Exchange despite its concealment of a 100 billion yen loss. Based on the extended period of this concealment, the soundness of the company’s structure is naturally cast into question. People in and outside of Japan may look upon Olympus’ survival optimistically, but has market confidence been truly secured?

This is not something we can overlook as an isolated incident. Yet, we must keep in mind that this is a serious issue involving one company, rather than a sign of the deficient moral fabric of the nation itself and the corporate ethics/governance that shapes everything around it. We must remain vigilant to identify trends that may compromise accountability.

The interest in Olympus’ former CEO Michael Woodford may fade, but we can’t deceive ourselves into thinking that the story is over in the eyes of the world economy. Japan overall is a first-rate, advanced nation, but without a strong economy, Japan may indeed slip into the status of second-rate nationhood.

In the midst of an economic downturn, the eradication of the fraud undermining our nation and companies is critical to the structuring of a robust securities and capital market for efficient corporate activity. Amid such challenges ACFE Japan has many roles to fill and we are up to the challenge.