A third-party committee appointed by Olympus Corp., a major maker of cameras and endoscopes, to investigate the firm’s accounting scandal said in its report Tuesday: “The management was rotten to the core and the surrounding portion was also contaminated, and the situation was a typical example of salaryman mentality in a negative sense.”

The panel found that Olympus began making speculative investments with financial assets in 1985 and that unrealized losses reached nearly ¥100 billion in the last part of the 1990s.

As of 2003, it had hidden ¥117.7 billion losses by employing an elaborate loss separation scheme. The panel said that if Olympus’ costs to manage the scheme are taken into account, losses would amount to ¥134.8 billion.

The report said “Olympus had originally been a sound company, with diligent employees and high technical strength. Not all areas of the company were involved in this misconduct.” It also said that no underworld organizations were involved. But the report pointed out that top management had deployed a one-man system for a long time, that there had been a lot of “yes” men among the directors and that the board of auditors had become more of a formality.

It also said that audit corporations checking the firm’s accounting documents did not function properly. The panel’s findings amount to a severe indictment of Olympus’ corporate culture, at least at the top level. It is symbolic that the firm’s wrongdoing surfaced after it abruptly fired President and CEO Michael C. Woodford on Oct. 14. Mr. Woodford apparently had pointed out abnormalities in the payment of massive advisory fees in connection with Olympus’ purchase of British medical equipment maker Gyrus Group PLC.

The report said that the loss concealment took place mainly when Mr. Tsuyoshi Kikukawa was president, adding that then Executive Vice President Hisashi Mori and then auditor Mr. Hideo Yamada played a leading role in cooking the books for 13 years.

In response to the report’s call, Olympus President Shuichi Takayama said Wednesday that all current board members will step down at an appropriate time and that the firm will set up a new committee made up of lawyers to investigate executives involved in the coverup. The scandal has tarnished the image of Olympus as well as Japan’s corporate governance. The company must conduct a thorough housecleaning to rid itself of the corrupt corporate culture that led to this most regrettable outcome.

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