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TOKYO — An independent investigative panel for Japan’s troubled optical equipment maker, Olympus, released a report today, which stated that Olympus had covered up to ¥134.8 billion ($1.7 billion) in losses since the 1990s. The panel noted Olympus had also paid off “cooperative individuals” to help hide the losses, and that a great sum of money had “flown outside of the company on a continuous basis.” But while those admissions are astonishing — they amount to one of the largest corporate frauds in Japan’s history  — the report only deepens the mystery of how so much money could disappear and who the "cooperative individuals" were.

During a hastily held press conference, Tatsuo Kainaka (pictured above), a former judge and chairman of the panel was repeatedly unable to account for who was paid to assist in the cover-up, how much they were paid, or where the billions of yen used to cover up the losses had gone. But he did insist that no money had gone to “anti-social forces” (反社会的勢力), a term used by Japanese law enforcement and regulatory agencies to refer to any group of criminals, including Japan’s yakuza. Kainaka was nervous at the press conference, stumbling over accounting terminology and unable to recall when the former CEO of Olympus, Toshiro Shimoyama, had actually left the company and whether or not he was implicated in the financial fraud.

A source on the joint task force made up of investigators with the Financial Services Agency, the Tokyo Metropolitan Police Department, and the Tokyo Prosecutor’s office said of the panel’s findings, “It’s a mystery to us how Mr. Kainaka can claim to not have a full understanding of where the money went and definitively say that no anti-social forces were involved.”

According to the written report, the bulk of the ¥134.8 billion loss came from failed financial speculation which by 2003 totaled ¥117 billion ($1.5 billion). After 2003, the company spent billions of yens on more bad investments, selling off shares of their investment firm ITX at a loss, and in pay-offs to keep the losses from becoming publicly known. The panel did not give a figure for how much money was spent in covering up past investment losses.

The report itself was written in obtuse Japanese terms, making it unclear whether the total losses possibly exceeded the ¥134.8 billion figure cited. It all hinges on whether the phrase に加え (ni kuwae) on page 114 of the report is taken to mean “in addition to” or is used as an inclusive “and.”

Olympus would not answer questions about the report or put reporters in touch with committee members to clarify related questions after the press conference.

The panel also urged Olympus to completely replace the current board members to deal with a shocking lack of corporate governance. The panel gave credit to the firm’s ex-CEO, Michael C. Woodford, for bringing the false accounting and financial problems to light.

Woodford was fired in October of this year after raising questions about the firm's dubious transactions, including the purchase of a face cream maker, a microwave food container manufacturer, and a waste disposal company at a loss of over $500 million in 2008.

The panel noted that its findings were based on voluntary questioning, data provided by Olympus, and that they had not been able to speak with all those involved in the transactions.

The source on the law enforcement task force examining Olympus also noted that the lone auditor on the panel has a long history of working for the troubled auditing firm Tomatsu.

Tomatsu has been in the news recently for their failure to investigate and/or inform the authorities that the former CEO of Daio Paper, one of their main clients, had embezzled over ¥10 billion ($129 million) from the company. Most of the money was spent gambling in overseas casinos. Regulatory authorities note that Tomatsu had been aware of accounting irregularities since last summer but had taken no action. 

Olympus’s former executives are currently under investigation for charges of fraud, breach of trust, and other financial crimes. The firm itself is facing the risk of delisting from the Tokyo Stock Exchange due to its window-dressing of accounts and misconduct. If police investigations were to determine organized crime involvement in the fraudulent accounting, delisting would be almost certain.

Jake Adelstein is an investigative journalist, consultant, and the author of Tokyo Vice: An American Reporter on the Police Beat in Japan. He is also a board member of the Washington, D.C.-based Polaris Project Japan, which combats human trafficking and the exploitation of women and children in the sex trade.

This article is from the archive of our partner The Wire.

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