In April this year, Michael Woodford became president of Olympus, a Japanese optical and medical equipment maker with a God-like reputation to match its name – until recently.

Last July, a small Japanese magazine called Facta published an article on Olympus's spectacular money-losing investments. Another magazine, Zaiten, followed up with an expose on Olympus's failed investment branch, ITX. This prompted Woodford to begin examining the company's records. By 12 October, Woodford urged the company chairman, Tsuyoshi Kikukawa, to step down due to "serious governance concerns". The response of the Olympus board was to strip Woodford of his executive position, while playing it to the Japanese media that he had been fired due to cultural clashes with management.

The Japanese mainstream press went with the cultural angle. But the foreign media – led by the Financial Times – began an assault on Olympus, strongly questioning its management decisions. When mainstream Japanese newspaper Sankei Shinbun ran an interview with Woodford in which he voiced his misgivings, the rest of the Japanese media began pursuing allegations of malfeasance as well.

By 26 October, with Olympus stock prices tanking, Kikukawa stepped down as chairman to become a director – while remaining on the board. The Tokyo stock exchange's head lambasted the company shortly afterwards. Japan's financial services agency began their own investigation, and the Japanese police began to look at whether Olympus executives could be charged with special breach of trust.

The series of mysterious transactions that have taken place at Olympus since 2006 would take pages to describe. To sum them up succinctly, between 2006-2008 the company is said to have bought three firms for ¥73.5bn, and wrote them down ¥55.5bn in 2009. In addition, the firm spent ¥210bn buying UK medical-instruments maker Gyrus Group in 2008, of which almost a third of the costs were paid to two mysterious financial advisory firms in the US and the Cayman Islands.

Most of the press coverage, except for that from the astute Hiroko Tabuchi at the New York Times, has been primarily focused on the dealings involving Gyrus, but a look at Olympus's investments in the three supposedly unrelated companies – Altis, a waste disposal and recycling company, Humalabo, a nutritional supplement maker/facial cream seller and News Chef, a seller of microwave cooking ware and asset management firm – may be more revealing of core problems at the firm.

When Olympus began seriously investing in the three companies, Humalabo and Altis shared the same address. All three companies also shared the same auditor, Minoru Tanaka. Tanaka heads an accounting firm, Rekorute, which the commercial credit rating service Tokyo Shoko Research gave a rating of four (requiring some caution) out of five. Humalabo is one reason that the Japanese press has been slow to criticise Olympus: while failing to operate in the black, they are one of the biggest newspaper advertisers in Japan. Most people are reluctant to choke those who feed them.

As for News Chef, former CEO Kenichi Nishimura, who assumed leadership in 1998 and officially left the company in 2003, is famous in investment circles – for being arrested in 2006 on fraud and other charges; he was caught swindling approximately 900 people out of ¥9bn, and was convicted for violations of the investment law in 2007. The fraud began while Nishimura was still listed at News Chef as a CEO.

All of this raises some concerns about Olympus's due diligence. Before investing over $200m in a poorly performing company, most firms would investigate its past representatives and possible conflicts of interest a little more diligently.

Back in the west, we may be shaking our heads at the lack of disclosure and naivete of a major Japanese company that may have been scammed out of millions of dollars. But it's not only Japanese companies that get conned. In 2008, Lehman Brothers Japan (LBJ) was swindled out of ¥35bn in an elaborate confidence game run by a hospital revitalisation firm called Asclepius, a now defunct firm with underworld ties which later filed for bankruptcy. Admittedly, the firm set up LBJ well before approaching them. They placed their own employees within Marubeni, one of Japan's most respected trading houses to make the deal look more legitimate and proceed smoothly. When the day for the loans to be repaid came, the company had folded up shop, the CEO had already sold off his house and the firm had vanished – along with most of the money. The collapse of the entire Lehman Brothers Empire assured that the truth nor all the money was ever found.

Woodford has showed tremendous courage and common sense in going public with what his concerns about Olympus. When the board of a company continues to make decisions that negatively impacts the financial situation of said company it is, under Japan's Companies Act, the duty of the CEO to address these acts of corporate malfeasance and if need be to make the shareholders aware of the problem – and possibly file criminal charges. Not to do so makes the CEO legally responsible.

Woodford knows enough about Japan to be aware that once you've exposed secrets, your career risks being buried with them if you keep your mouth shut. Judging by recent court decisions – in which Olympus was found guilty of relentlessly harassing a corporate whistleblower – he made the right call on that one as well.