If Noble Japanese CEOs are Cooking Books, We Are Screwed

There’s no shortage of Ponzi schemes and corruption in American corner offices. That’s how we roll as the wealthiest nation on Earth. Knocking American greed is kind of like knocking Chinese government graft. It’s how the game is played, unfortunately.

So it’s especially disturbing that three former executives at camera maker Olympus Corp. (PINK:OCPNY), including ex-chairman Tsuyoshi Kikukawa,  were arrested this week on charges that they violated Japan’s Financial Instruments and Exchange Act. That’s their version of Sarbanes-Oxley and other SEC regulations in force for U.S. corporations.

The Japanese company is facing shareholder lawsuits over the scam. Olympus may also face further criminal investigation after admitting to a 13-year cover-up scheme to cook the books and inflate performance. The company restated past earnings reports recently that resulted in a staggering $1.3 billion reduction in net assets last December.

The stock has plunged 49% since the Oct. 14 dismissal of its first non-Japanese president, Michael Woodford, who later publicly questioned inflated takeover costs, according to recent reports.

Kikukawa, 70, who headed Olympus for 10 years until last year, Hideo Yamada, 67, who led the investment unit since the 1980s and later became an auditing officer, and former Executive Vice President Hisashi Mori concealed losses, booked overstated goodwill and falsified financial statements, the prosecutors said in a statement.

“It may take time for Olympus to regain its reputation,” said Yoshihiro Ito, chief strategist at Okasan Online Securities Co. in Tokyo told BusinessWeek recently. “The company is trying to show it’s making an effort to rebuild its management and balance sheet.”

This kind of nonsense is old hat to America – whether it be Enron or Worldcom or Healthsouth, which fudged the numbers, or Lehman and AIG (NYSE:AIG), which lied and misled regulators and shareholders about leverage and risk.

Oh, and let’s not forget about the recent shenanigans at Diamond Foods (NASDAQ:DMND). As Tom Taulli wrote recently, Diamond restatements could be the beginning of the end.

But if honor bound Japanese companies start cooking the books? And they need a Western CEO to be brought in to sound the alarm bells?

Not good.