Update on Olympus: Potential Ties to Organized Crime

Not only is Olympus being accused of a massive financial statement fraud, the latest revelations suggest that the financial statement fraud involved companies with links to organized fraud.  According to the NYT:

Japanese officials say that at least $4.9 billion is unaccounted for in a financial scandal at Olympus and are investigating whether much of that money went to companies with links to organized crime.

In a memo prepared by investigators and circulated at a recent meeting of officials from Japan’s Securities and Exchange Surveillance Commission, the Tokyo prosecutor’s office and the Tokyo Metropolitan Police Department, officials say they are trying to determine whether Olympus worked with organized crime syndicates to obscure billions of dollars in past investment losses and then paid them exorbitant sums for their services.

 The article also contains some additional details about the nature of the alleged fraud:

At the heart of Olympus’s action is a once-common technique to hide losses called tobashi, which Japanese financial regulators tolerated before clamping down on the practice in the late 1990s. 

Tobashi, translated loosely as “to blow away,” enables companies to hide losses on bad assets by selling those assets to other companies, only to buy them back later through payments, often disguised as advisory fees or other transactions, when market conditions or earnings improve. 

The Japanese investigators’ memo chronicles Olympus’s efforts to pay off its previous losses through payments camouflaged as acquisitions and supposedly related advisory fees to buy companies that seemed to have little relation to its main business.

With the knowledge that this fraud may have been aided by organized crime, I wonder how far the link may have gone.  In the Crazy Eddie fraud, the Antar family went to great lengths to perpetrate their fraud, including infiltrating the audit firm that was signing off on Crazy Eddie's financial statements.  I'm wondering if we might learn of something of that nature with Olympus.  If organized crime was involved, it doesn't seem like too much of a stretch to think that individuals within Olympus's audit firm, within Olympus itself, and within other organizations with ties to Olympus may have been influenced to ignore the shady dealings going on within Olympus.