I am trying to get a handle on why the non-economic news media complex is fascinated with the Daio Paper scandal while remaining virtually silent on the much, much larger Olympus scandal. Every night we are treated to breathless updates featuring snippets of the handsome, young former chairman of Daio, mostly walking down the steps of his home. Not that there is much to the story: little rich boy takes over Daddy's company, uses its cash reserves as his own personal piggy bank, blows the money in Las Vegas and other venues, finds that his own personal fortune cannot pay back even half the loan from the company's kitty. Even the Japanese press does not make any bones about this being a story of a company where the founding family treated the company as its own private possession, with their underlings obliging them (
en).
By contrast, the Olympus story is rife with "you cannot make this stuff up" international skullduggery: a foreign president brought in to clean up the company uncovers a mega-sized scandal and is summarily sacked for doing his job properly; record advisory fees paid to a Cayman islands company that has since evaporated, acquisitions whose value Olympus had to write off in a year; a pair of mysterious banker brothers -- it is all just incredible (
en - with a special double hurrah for Hiroko Tabuchi).
Yet in the mainline press and on television, nada. Just a rote announcement that the chairman who sacked the foreign CEO himself resigned on Wednesday due to "confusion over acquisitions" made by Olympus.
The scale of the robbery of Olympus is
50 times 5 times the size of the Daio Paper scandal.
What gives?
If the media makes too much of a fuss they will be targeted by organized crime. Arson attacks that go unsolved, bullets left in the mailbox, all that sort of thing.
ReplyDeleteI also think the reasons stem from the fact that everyone is in the same game here. I would be less than surprised if it is only large companies that use yakuza services to keep order.
Finally there is the embarrassment factor. The actual scandal and how it was handled looks like something from a banana republic.
Of course newspapers tend shy away from organized crime; most always have.
ReplyDeleteBut I think that perhaps you give a good reason yourself here: The Daio scandal is easy and comprehensible. You can distill the core events into a single sentence if you want, and there's clear good guys and clear bad guys.
The Olympus thing is ambiguous. _Something_ smells extremely bad, but what kind of smell, and from who is obscure. There is yet no coherent narrative, no clear misdeeds, no smoking gun. "Something is going on and we don't really know what!" does not make for a good headline. One is easy to report, one is very hard.
Ideally some of those reporters should be digging for the truth here. But we're talking about economy reporting, not politics. There is no culture or tradition of investigative reporting in that field. A forward-thinking paper would perhaps put one or two of their serious reporters on that case, but then, Japanese papers don't exactly cover themselves in glory over political scandals either. Of course, Olympus is a large, international company, so you would have hoped The Economist or similar would step up, but so far there is nothing.
The Economist covered the story in last week's edition in article about corporate governance -or lack there of- in Japan. Financial Times has done several articles, Reuters, and Bloomberg have been on it.
ReplyDeleteThe US FBI is evidently investigating according to one the articles.
As for the entertainment factor, what could more hysterical than top executives not being able to remember to whom they paid a billion dollars. Surly, it won't be long before Olympus top management check into a hospital for high blood pressure treatment.
It's the top news at Yomiuri (online) at the moment, dislodging even their usual cheap shots at Ichiro Ozawa.
ReplyDeletehttp://www.yomiuri.co.jp/atmoney/news/20111030-OYT1T00260.htm?from=top
Herr Morén -
ReplyDeleteAs anonymous #2 has pointed out, the story has been covered extensively -- and deeply too -- but by the non-Japanese general readership news media.
Why have the TV networks and the general news press been unwilling to delve into this juicy story.
There is no obvious yakuza connection here, only a pair of ostensibly reputable banker brothers who probably through the two major causes of financial scandal in Japan - golf and alcohol - fleeced an internationally known brand of 687 million dollars -- in plain sight not only of the company's compliance department and its auditors but the entire world's investment community.
Wataru-san -
ReplyDeleteThank you for the link. Still, the interview is still pretty sparse and contextualized in terms of the former CEO's telling the Yomiuri that he has spoken with the FBI.
@MTC - comment 5
ReplyDeleteThe general “sexiness” (flamboyant playboy blows away papa's hard earned money) of the Daio paper case makes it an easy target for the general media (TV esp); and there is the moralistic angle. The Olympus case is more complicated, add the fact that it is an “old money”, established Japanese corp. Still, I've been surprised about the rather superficial treatment by the Japanese MSM. I don't think Olympus has the kind of advertisement cloud to pressure the media companies (compared to say our friends at TEPCO).
I'm glad to hear I'm not the only one who thinks the yakuza angle has been totally overblown by some. It makes for an easy, too easy, story.
The way Olympus is acting, and the fact that these odd M&A payments happened twice on two fronts, suggests that the company didn't get "fleeced" by bad people. There seems to be some intention to "losing" all the money.
ReplyDeleteFACTA and some insider Japanese financial blogs think this whole scandal is about Olympus using M&A fees as a clever accounting method to post old losses or pay off old debts. This actually makes way more sense than yakuza stealing or embezzlement. They intentionally overpaid and the difference was either an imaginary transfer of wealth or was rerouted later.
If they truly had money stolen from them, it would make sense they would claim that at this point. But they're doubling down on the fact that the fees were all "reasonable."
Marx -
ReplyDeleteThank you for the news tidbit. Using immense fees for "services rendered" as a cover for old losses makes a lot of sense... though it sounds a lot more like something a Chinese company would do.
Daniel -
You may be on to something with this idea. Tracking down the various aspects of this story would require collaboration between the various pages of the newspaper, which is unlikely(you would be the expert on this)...and the television press takes its clues from what the print press is doing.
Olympus was one of the top stories on NHK's News 7 the other day (don't recall which day). There were several minutes coverage, including clips of the ousted president speaking. I wasn't paying much attention, but to say that NHK has ignored the story completely is not true. The basic message of the story was, 'What the hell is going on at Olympus?! It all looks very fishy!'
ReplyDeleteIt will be interesting to see how this story unwinds. I just read the boss of Olympus Germany was indicted for paying out about USD 1 million for no services and a German manager at plant in Portugal was fired for whistling blowing on fees paid to an architect firm that were 40 pct above market.
ReplyDeleteDr. Cave -
ReplyDeleteWere you watching the broadcast in Tokyo? Or the temporarily stored broadcast on the Web?
I was watching the broadcast in Kyoto. The Olympus scandal was covered on tonight's NHK News 7 too (3 November) - just watched it. It was the second or third report, for several minutes from about 7.10. Several clips of interview with Woodforde. Again, strong impression given that things are extremely fishy and that Olympus have serious questions to answer.
ReplyDeletePeter Cave -
ReplyDeleteYes I saw the NHK broadcast up here in Tokyo. A healthy chunk of time devoted to the story...and yet they still pulled their punches, not nailing home the point that the advisory fees were exhorbitant.
Well, the NHK news is just that - news. It's not a commentary programme. The point about the fees being exorbitant was very forcibly made by Woodforde in one of the clips from the interview with him in the News 7 report, so I don't think there was a need to drive it home. You could certainly argue that the Olympus scandal should be covered on NHK's 'Close-Up Gendai', though, which IS an analysis and commentary programme.
ReplyDeleteFor anyone interested, a link to a WSJ blog covering the Olympus press conference. Kikukawa's underling real got a good grilling for his loyalty.
ReplyDeleteAs some commentators mentioned above, it seems they were covering losses. But on they have been doing this for almost 20 years and the amounts are huge. Smells of money laundering to me.
http://blogs.wsj.com/japanrealtime/2011/11/08/live-blog-olympus-admits-to-hiding-losses/