The Backstory to the Scandal That May Bring Down Olympus

The financial scandal rocking Olympus is one that the company may not survive. The company’s stock price plunged another 17% today, and the Tokyo Stock Exchange has informed the company that it will be delisted if it doesn’t meet a December 14th deadline for reporting earnings. The New York Times has a great piece on how Olympus got itself into this mess.

In June 1998, a disturbing rumor tore through trading floors in Tokyo: Olympus had suffered colossal losses on derivatives trading, punching a large hole in its balance sheet. The company’s shares spiraled down 11 percent in three days.

But Olympus categorically denied the rumor and went on to post record profits. All was well in the house of Olympus, the newly installed president, Tsuyoshi Kikukawa, assured investors.

Turns out the losses were in fact real. They were so colossal, however, that booking all of them could have pushed the company into bankruptcy. The management then decided to fudge their numbers in an effort to save the company.