Deconstructing the Olympus Scandal

Former Olympus CEO Michael Woodford’s flight from Tokyo in October and request for police protection in London was prompted by suspicions of yakuza involvement in the optics manufacturer.

Woodford claims his fears sprang from some lurid allusions in a FACTA magazine article published in late September to Cayman Islands-registered funds that had owned shares in three obscure, money-losing Japanese companies bought by Olympus: Altis, a medical waste disposal firm; News Chef, a maker of microwaveable plastic containers; and cosmetics firm Humalabo.

One of the Cayman funds was called Dynamic Dragon II. FACTA traced its origin to J Bridge Corp., an investment firm listed on the Second Section of the Tokyo Stock Exchange.

“This company is suspected of having a relationship with anti-social forces and is shunned by the capital market,” FACTA warned in its story.

“Authorities are still watching the movements of the former president, Toru Masuzawa, who ‘fled’ to Singapore,” the magazine claimed.

‘Anti-social forces’ is a Japanese euphemism for the yakuza.

The current CEO of J Bridge, which changed its name to Asia Alliance Holdings in 2010, is Kotaro Takamori. He strongly denies that J Bridge has any criminal connections or that it set up Dynamic Dragon, but confirms his company might have invested in the same special purpose vehicle (SPV) as Olympus.

“SPVs like Global Target or Dynamic Dragon have lots of sub-funds, so may be we invested in Dynamic Dragon sub-fund A, but Olympus used sub-fund B,” Takamori told me.


Some executives of J Bridge and the companies into which it has invested have committed crimes. However, an investigation I undertook for Asiamoney magazine did not uncover any mob ties to J Bridge.

Former J Bridge chairman Hidetaka Noda was convicted in 2009 of cross-border insider trading in J Bridge shares in 2006, using an account in Singapore.

The former CEO of News Chef, Kenichi Nishimura, was convicted of fraud in 2007. Yukihide Goto, the president of TransDigital, a failed computer systems developer, was convicted for transferring company assets to a creditor before filing for bankruptcy in 2008. J Bridge had sold its stake in TransDigital in 2006.

There is evidence to support the claim made by FACTA that J Bridge had “preyed on a group of companies that were driven into a difficult situation.” It is also unclear how J Bridge/Asia Alliance has been able to fund its investments and remain in business.

In an email to me, Takamori stated that since joining J Bridge in 2007, “the company had never made profit, we had only impairment loss and realized loss.”

The Olympus scandal is about a world-famous Japanese optics maker that lost almost ¥100 billion through zaiteku financial speculation and then tried to cover it up. That may sound simple enough, but the actual means of concealment, laboriously picked apart in a 200-page investigation report commissioned by the embattled company, can be mind-bogglingly complex.

‘The Singapore route,’ for example, involved Olympus making substantial deposits at the Singapore branches of two European banks, as collateral for loans to shell companies and funds registered in the Caymans. Olympus then used these Cayman conduits to buy Altis, News Chef and Humalabo at vastly inflated prices. The excess was then channelled back to help settle the original losses from speculative investment.

Around 1998, the report states that former Japanese banker Akio Nakagawa, who was helping Olympus disguise its losses, introduced Olympus executives Hisashi Mori and Hideo Yamada to Commerzbank International Trust in Singapore. There they met an employee identified in the report only as ‘Chan,’ who provided invaluable help.

When ‘Chan’ left Commerzbank in 2000 and moved to Société Générale, Olympus shifted its time deposits from the German to the French bank in Singapore. In 2004, ‘Chan’ branched out on his own, and managed a Cayman-registered fund, set up in 2005, in which Olympus invested ¥60 billion.

Takamori, who used to work for Orix in Hong Kong and Beijing before joining J Bridge, said this person was Chan Ming Fong. Chan, who was of Taiwanese extraction, had graduated from a Japanese university and worked at Wako Securities before joining Commerzbank, he said.

One of Chan’s colleagues at Wako Securities in Japan was Masuzawa, who later joined Chan at Commerzbank International Trust in Singapore, but left after just one year. Commerzbank head office declined to give any reason for his departure. Masuzawa joined J Bridge in 2004, the same year that Chan left Société Générale.

J Bridge emerged from the merger of a spinning company and a warehousing business in Nihonbashi, the old commercial and financial heart of Tokyo.

Nihonbashi means ‘Japan bridge,’ which Noda and Masuzawa took for the new name of the company after joining in 2004.

J Bridge soon embarked on a blizzard of acquisitions, divestments, and capital raisings.

A 2005 company filing said its objective was to “invest in, manage, rehabilitate and restructure undervalued or underperforming companies and businesses in order to enhance and maximise their values.”

Ethan Penner, a pioneer of mortgage-backed securities who made a fortune for Nomura Securities in the U.S. in the late 1990s, briefly worked for J Bridge.

“I once agreed to join an advisory board for a company called J-Bridge when a former employee of mine, Yuichi Hirayama, who remains a friend to this date, asked me to do this as he was involved in the leadership of J-Bridge and had great plans for the company. His plans ultimately were not realized and he left the company shortly thereafter and my involvement ceased,” Penner, who is now an executive managing director at CNB Richard Ellis, told me. “The entirety of my relationship/involvement amounted to attending a few meetings with the media and a meeting or two with Hirayama-san and others in management at that time."

J Bridge targets varied from operators of bicycle racetracks and multi-storey car parks, to makers of soybean foods and heavy construction plants.

But in several cases J Bridge’s targets weakened considerably after its participation. Kosugi Sangyo, a maker of golfing wear, filed for bankruptcy in 2009, two years after J Bridge sold its stake. Restaurant operator Tasco System was delisted from the Jasdaq and ceased operation after J Bridge sold out in 2007. Osaka property firm Reicof filed for bankruptcy in 2008.

In 2010, J Bridge acquired a Japanese hospital only to sell it for a loss of about ¥1 billion soon afterwards, saying it was withdrawing from the medical and healthcare business.

Another flop was J Bridge’s 2005 takeover of Singapore building materials maker Rotol.

Masuzawa was installed as chairman and executive director of the company 2007, but J Bridge sold most of its stake in Rotol in 2008 to Mulpha International, and reported a ¥430 million loss on the investment.

Mulpha is a Malaysian conglomerate headed by Lee Seng Huang, who also chairs Sun Hung Kai Financial, an investor in J Bridge/Asia Alliance.

The Singapore Exchange delisted Rotol last year; the company had been on its watch list since 2008 after three years of pre-tax losses.

While Rotol was bleeding money, Masuzawa was building an award-winning house in Singapore’s exclusive marina resort, Sentosa Cove, which has since been sold. A much smaller villa on Ocean Drive is now on the market for S$38 million (¥2.3 billion).

Masuzawa is still “based in Singapore, but he keeps coming to Japan,” according to Takamori. Masuzawa did not respond to an interview request.

Until recently, the top investor in J Bridge was Sun Hung Kai & Co., established in Hong Kong in 1969 as the financial arm of Sun Hung Kai Properties, now the world’s biggest property developer by market value.

Allied Group, the Malaysian conglomerate founded by Lee Ming Tee, in 1996 bought a controlling stake in Sun Hung Kai & Co. from the family of one of the Sun Hung Kai founders. Lee Ming Tee, the father of Sun Hung Kai & Co.’s CEO Lee Seng Huang, was sentenced in Hong Kong in 2004 to one year in jail for falsifying accounts.

Akihiro Nagahara, chairman of Sun Hung Kai & Co. consumer finance subsidiary United Asia Finance, has been a J Bridge board member since 2007. Nagahara, who did not respond to written questions, also chairs the Hong Kong Licensed Money Lenders Association.

Asia Alliance Holdings announced on November 29 a “drastic reconstruction of the company’s management” and a shift to investment opportunities in China, especially in “pre-IPO companies”.

Takamori says Asia Alliance’s top shareholder will be a fund of Malaysian-Chinese investors put together by the company’s next president and CEO, Yoshinori Funato, who is set to be confirmed at an extraordinary general meeting in February. He has worked at Nomura Securities, UBS, and Merrill Lynch in Tokyo.

According to the Asia Alliance website, the chairmanship of the company is to be shared between Yang Zilin, chairman of China Bohai Bank and former head of
the Ex-Im Bank of China and the Hong Kong office of Bank of China, and retired Japanese diplomat Akitane Kiuchi, a former private secretary to the late Kakuei Tanaka, who normalized relations with China in 1972.