After the whistle has blown

Michael Woodford, former President and Chief Executive of Olympus Corporation, pictured at his home in London, December 9th 2011. Within two months of his appointment, he became a central figure in the Olympus scandal, having been removed from his position after he questioned sizable fees that Olympus had paid to obscure companies (which appear to have been used to hide old losses). Credit: Susannah Ireland / The Independent

Michael Woodford was told exactly how he would die: “I would jump off the top of a building in Tokyo. They’d find alcohol and sleeping tablets in my system and I would have been ‘suffering from depression’,” he says.

The ominous email was sent to Woodford by Jake Adelstein, a US crime reporter who made his career at Japan’s Yomiuri Shimbun newspaper. Less than a month earlier, Woodford had blown the whistle on a £1.1 billion corporate fraud – one of the largest ever known. The perpetrator of the fraud was Olympus – the Japanese manufacturer which had dismissed him as CEO not long before he turned whistleblower. According to a report in Facta magazine, the fallout allegedly reached into the country’s underworld, what they termed “the antisocial forces” (a common euphemism for for the Yakuza crime syndicate). Having fled Japan, Woodford felt safe in London. Adelstein was warning him not to.

Woodford claims it was fear of being violently silenced by the Yakuza – in just the way that Adelstein would later describe to him – that led him to a Tokyo park near his flat, hours after he was fired on 14th October 2011. He called Jonathan Soble, the Financial Times correspondent in the Japanese capital. “I want to be able to see all around me, I feel safer here,” Woodford told him. They met in a café and Woodford told Soble everything he knew about Olympus’ questionable acquisitions, large payments to mysterious companies – including one in the Cayman Islands – and secretive board members. Then he rushed out of the city, and out of the country.

“I was told I would jump off the top of a building in Tokyo. They’d find alcohol and sleeping tablets in my system”

When Woodford arrived at Heathrow, his wife Nuncy was waiting for him with a copy of the newspaper. “Sacked Olympus chief had sought answers to over $1bn in payments,” the front page read. Woodford switched on his phone. It started beeping instantly: “Wall Street Journal, New York Times, CNN, BBC, everyone, ” he recalls. “By Monday morning it was around the world and Olympus didn’t know what had hit them.”

The fallen gaijin

Woodford is spending the morning in his South Bank penthouse  overlooking the Thames. “Whistleblowers are very much in vogue these days,” he says, handing me a cup of tea. He thinks that the financial crisis and the scandals such as Libor that have punctuated it have made people more cynical towards big business and more sympathetic to those that reveal its inner workings. The law doesn’t necessarily agree. We meet shortly after Chelsea Manning has been sentenced to 35 years for leaking hundreds of thousands of classified documents to WikiLeaks, and Edward Snowden and Julian Assange are living in confinement. Still, Woodford thinks people’s perceptions of whistleblowers have changed: “Once you would’ve been some sort of leper, some snitch and tell-tale, but I think people don’t view you like that any more,” he says.

Woodford should know – he has managed to spin his experience as a whistleblower into a new career. He spends his days hopping from one speaking engagement to another, and the book he wrote about his experiences, ‘Exposure’, is being turned into a film.

Michael Woodford with Tsuyoshi Kikukawa

A Hong Kong TV screen shows a news report about Edward Snowden

Julian Assange

He now says he never wants to work for a corporation again. But a little over two years ago, Woodford was a trailblazer – the first gaijin, or foreign, ‘salaryman’ to become president of a Japanese firm, after climbing the Olympus ranks over 30 years.

The 53-year-old originally hails from Staffordshire, but spent most of his youth in Liverpool. He started his ascent to the peak of Olympus in 1981, when he joined a British medical equipment unit of the firm as a junior salesman. Presiding over the European division of Olympus since 2008, Woodford’s reputation was that of a no nonsense cost-cutter. His approach proved successful: in February 2011 he was asked to do the same on a global scale and was promoted to president at the company’s Tokyo headquarters. Former president Tsuyoshi Kikukawa initially stayed on as CEO, but on 30th September 2011 he conceded that title to Woodford as well.

By that time, the fabric of Woodford’s career had already begun to unravel.

All hands in the air

Woodford had first been notified of Olympus’ wrongful accounting in July by an article in Facta, a small investigative publication he describes as “extraordinary” for having the courage to publicly question a Nikkei-listed company. Facta alleged that Olympus had spent around $1 billion on “Mickey Mouse companies” that had little to do with Olympus’ core business and appeared to have been bought at over-inflated prices. The article also pointed to the acquisition of a British manufacturer called Gyrus Group PLC at an inflated price, and linked nearly $700 million in fees to the purchase.

“He was prepared to destroy me and my family. That’s not a samurai, that’s a coward”

When Woodford asked Kikukawa, who was still chairman, and vice-president Hisashi Mori about the suspicious transactions, he was stunned by their attempts to sweep them under the rug. It later emerged that these purchases were part of an elaborate fraud to disguise Olympus’s colossal losses. But Woodford didn’t know that yet – he wrote several letters to his board colleagues, demanding that the matter should be investigated. In his sixth such communication, he included a condemnatory report by accounting firm PricewaterhouseCoopers, which he had secretly commissioned and that hinted at the truth. He urged Kikukawa and Mori to step down in order to minimise damage to Olympus’s reputation. “I begged and pleaded with my board colleagues not to put the fact that I was a gaijin before the facts,” Woodford says. “Not to put their relationships with other directors, principally Kikukawa, in front of the interests of the 40,000 employees.”

When he walked into a board meeting three days later, on 14th October, the original agenda had been erased and replaced with one item:
his dismissal.

From a seat at the corner of his glass dining table, Woodford stands up and extends his hand towards the ceiling to demonstrate how his colleagues unanimously voted him out of his job that day. “They were publicly, physically demonstrating their enthusiasm, and I wasn’t allowed to talk because of a conflict of interest,” he says. As he left the building, he was asked to hand in his phones and computers.

Woodford recounts the story of how he was kicked to the curb after 30 years with visible agitation. Still, he maintains that his decision to call Soble had nothing to do with vengeance or bitterness. “They say revenge is best served cold, and I wasn’t cold – my emotions were very hot,” he says. Kikukawa had been a paternalistic figure in Woodford’s life before he evicted him from Olympus’ ranks.
“He was prepared to destroy me and my family. That’s not a samurai, that’s a coward,” Woodford says.

The fallout

Olympus at first denied Woodford’s allegations but admitted on 8th November 2011 that it had tried to cover up investment losses dating back to before the 1990s. In February 2012, the entire board of Olympus resigned. Kikukawa, Mori and one further executive were handed suspended prison sentences in July 2013. The claims about Yakuza involvement were never proven.

He may have escaped the predicted fall from a tall building, but Woodford’s disclosure meant the end of life as he knew it. “Everything just went into total meltdown,” he says. He spent his days talking to journalists, pressing for prosecution with Japanese authorities and eventually suing Olympus for unfair dismissal. In November 2011, he returned to Tokyo to meet with Japanese investigators and to see his former colleagues in a board meeting, which he was still allowed to attend.

Most of Woodford’s friends fell away, fearing that an association with him would be detrimental to their careers. “It taught me people care about themselves and their nuclear families, and fuck everyone else,” he says.

Woodford is open about the fact that he took to alcohol to manage his stress. In the meantime, Woodford’s own nuclear family, and especially his Spanish-born wife Nuncy, bore the brunt. “My wife was deteriorating,” he says. “I think she was close to having a nervous breakdown.” At these difficult times, he admits he put her wellbeing second. “There were days I had her shaking and I had to go to a TV station,” he says. “My priority was to put the fire out, not look after her.”

As the details of the fraud emerged, Olympus’ stock value plunged by 80 percent. The aftershocks are still being felt by the company: in early September this year the UK Serious Fraud Office launched a prosecution of Olympus Corporation and Gyrus Group, charging them with providing “misleading, false or deceptive” material in their accounts.

Still, Woodford maintains that he ultimately did his old company a favour by ridding it of its entire board as well as the loss-making companies that were bought at inflated prices. “To me, profit and loss are less important than basic human values,” he says. “It can’t be in any company’s interest to build your corporation on falsified figures.”

Asked if he would do it all again, he says he was put in that position and that he didn’t make a deliberate choice. The real hero, he says, was the original whistleblower who first approached Facta and whose identity remains unknown to this day. Woodford’s situation, he claims, was one of being in the wrong place at the wrong time: “I think a lot of people in this situation would do what I did,” he says. “If you don’t, you become complicit. You become part of
the problem.”

Now that the dust has settled for Woodford, he says his executive days are over. Instead, he works for charities, has a family trust, and lectures about workplace behaviour. In his own words, he never wants to be in a boardroom with 200 PowerPoint slides ahead of him again. “I don’t want all the bullshit and playing games you get in any corporate structure,” he says. “I was kicked out of the pack and I’m a lone wolf now. I like it that way.”

Posted on Wednesday, October 25th, 2023 - Categories: #12 - Jul-Sep 2013, App Issues.