TOKYO The scandal engulfing Olympus Corp raises fundamental questions about the need for greater transparency in corporate Japan and the failure of mainstream media to press for more disclosure.
That's the view of Shigeo Abe, publisher of Facta, the monthly magazine that first raised red flags about Olympus in its August edition, two months before the scandal erupted with the firing of its CEO, Michael Woodford, on October 14.
Abe, a veteran journalist in his 60s who refuses to retire, has spent decades of his career poring over company accounts and says he often finds things that don't add up.
"With a certain level of expertise you can find things in the margins that appear funny," said Abe, a softly spoken man who wore a jacket but no tie as he spoke to Reuters about one of the country's biggest corporate scoops.
"It takes time, but after looking closely at 10 years of financial statements you can pretty much ferret out irregularities."
Facta was first to report previously undisclosed details about Olympus's acquisitions of 3 small, obscure Japanese companies for a total of 73 billion yen ($959 million) that were soon after written down in value.
It also threw a spotlight on Olympus's acquisition of British medical-equipment maker Gyrus for $2.2 billion in 2008.
Woodford says he was fired for querying the acquisitions, including an abnormally high $687 million fee paid to advisors for the Gyrus purchase.
Olympus acknowledges the payment and has denied any wrongdoing. It says Woodford was dismissed due to a clash in management.
Abe, who was a journalist with the Nikkei newspaper for 25 years through 1998, said it would have been tough to break the Olympus story while working for a major Japanese newspaper.
After leaving Japan's leading business daily, he worked at another magazine before setting up Facta in 2005, a niche publication mainly funded by subscriptions.
"I left the Nikkei because I thought that even if I got scoops through investigative reporting they wouldn't be published," said Abe. "I felt the limitations of commercial media. I couldn't write what I wanted to write."
Facta, which has four staff journalists and uses dozens of freelance reporters, is able to beat much larger newspapers to the punch because it isn't shackled by the need to keep big advertisers happy, Abe said.
In contrast to aggressive coverage by Western media, major Japanese newspapers and TV broadcasters have not treated the Olympus scandal as a top story, offering little by way of deep analysis or investigative reports.
In its October edition, Facta described recent Olympus ads as a subtle way of "stuffing bills into the media's mouth."
In a faxed statement, the Nikkei newspaper said its editorial and advertising operations are completely separate and that advertising does not influence its editorial policy.
"And with respect to Olympus, we are reporting and covering it in an appropriate manner," the business daily said.
DAVID AND GOLIATH
Abe says Japan's mainstream media has failed the public by not pressing for greater transparency and not reporting more aggressively on corporate malfeasance.
Facta has broken a number of stories on corporate scandals.
It was among the first to report on the circumstances surrounding technology group Fujitsu Ltd's firing of its ex-president in 2009. Fujitsu was forced to revise the disclosed reason for his dismissal in 2010 to suspected links to organized crime, an allegation the former president has denied.
When at the Nikkei, Abe said he had uncovered major problems at Yamaiichi Securities a few years before its bankruptcy in 1997. His editors declined to publish the story, worried this would lead to the broker's collapse, he said.
The Nikkei said it always reports in a responsible manner after verifying the reliability of information and other factors. It also pointed to an award-winning scoop on Yamaiichi's collapse in 1997.
Abe says irregularities are prevalent among Japanese firms, which went to great lengths to flatter their balance sheets following the bursting of the country's economic bubble 20 years ago.
Back then, as property and share prices collapsed, Japan Inc came under enormous pressure to make big asset writedowns but accounting rules at the time, before the era of global fair-value accounting, gave them some room to maneuver.
Abe says some of them never lost the habit.
"Since the 1990s corporate governance in Japan has been in a very bad state and disclosure has been incomplete," said Abe.
"This has been one of the main factors leading to the economic malaise of the past 20 years."
(Editing by Mark Bendeich and Dean Yates)