Story highlights Michael Woodford fired as Olympus CEO after he exposed a $1.7 billion cover-up

Woodford was appointed as first foreign CEO when a local magazine broke news

Olympus shares lost around 80% of their market value in weeks after

Woodford: Case highlights the dysfunctionality of corporate Japan

When CEO-turned-whistleblower Michael Woodford exposed a $1.7 billion cover-up of losses at Olympus, he was forced to flee from Japan, fearing for his life, as the scandal sent shockwaves through the country's tight-knit corporate world.

The 52-year-old Briton had barely settled in to his new role as the company's first foreign chief executive when he became aware of a potentially explosive magazine article.

FACTA, a local Japanese title with only nine staff, had published a detailed expose in July 2011 questioning exorbitant fees it claimed the camera and medical equipment maker had paid consultants for a 2008 acquisition deal. It also questioned extravagant purchase prices of three small companies.

"The company had bought three 'Mickey Mouse companies' for a billion dollars: a plastic plates company for microwaves, a cosmetics company -- a face cream company -- and a recycling company, but with no turnover," Woodford told CNN Tuesday, as his new book about the saga, "Exposure," prepared to hit bookshelves.

"They then paid $700 million dollars in fees to somebody, we didn't know who, in the Cayman Islands. I begged and begged and pleaded 'don't treat me as a gaijin (foreigner), treat me as a colleague who cares about this company.' But they didn't listen, not one of the 14 (board members), including three non-executive directors."

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Instead Woodford quickly found himself out of a job after he attempted to get some answers from then-Chairman Tsuyoshi Kikukawa and former Executive Vice President Hisashi Mori. The board voted unanimously to fire him from the post.

Shigeo Abe, publisher of FACTA, gave his own blunt assessment of why Olympus had selected what he called a "bottom-ranking foreign executive" from 25 candidates to be CEO in the first place. "Mr. Kikukawa's aim was to keep the fraud in secret under the foreign president because Mr. Woodford could not speak and read Japanese," he told CNN last year.

Woodford refused to go quietly, choosing instead to unleash a firestorm of publicity that would prove costly to the board and company itself. Kikukawa and several other board members were eventually forced to resign, while Olympus shares lost around 80% of their market value in the first weeks after news of the scandal broke.

A special audit of Olympus in December last year, led by a former Japanese Supreme Court judge, published a report that blasted Kikukawa's controlling style and the company culture that allowed losses to be disguised in dubious fees and overvalued payments for its acquisitions. "The management was rotten to the core, and infected those around it," the report said. The case also raised questions about the level of transparency in Japan Inc. when to comes to business practice generally.

In September this year, Kikukawa, Mori and another senior executive, Hideo Yamada, admitted filing false reports and inflating the company's net worth. The men could face up to 10 years in prison and fines of up to 10 million yen ($128,400), Japanese media reports have said.

"It was an incredible story," said Woodford. "It illustrated the dysfunctionality of corporate Japan and the way the capital markets work.

"A month after I was dismissed, the share price of Olympus had fallen by 81.5% -- $7 billion dollars had been struck off the value of the company, yet the institutional shareholders in Japan would not offer one word of criticism of the incumbent board, or one word for the ex-president in support of him trying to expose this fraud."

But almost a year after he was forced out of the company he had served since the 1980s, Woodford says no lessons have been learned from the scandal by corporate Japan.

"Nothing has changed," he said. "The ruling party, the DPJ, at the height of this said they were going to put forward a recommendation that one non-executive director should be a minimum requirement under Japanese company law.

"In July of this year, the Ministry of Finance dropped that proposal, so out of the 1,600 companies on the Nikkei, over 1,000 don't have one outside director. What are they scared of? What does that tell investors who are looking at Japan?"

Woodford compared the success of South Korean electronics giant Samsung to that of ailing Japanese rivals such as Sharp, Sony and Panasonic -- all have their debts set at junk status.

"Japan is losing it," said Woodford. "The companies and country can't change. They just can't change themselves. It's desperately sad."