Neil Whittaker (pictured), the former high-profile MD of Fuji Xerox NZ (FXNZ) and Fuji Xerox Australia (FXA), was paid more than $A1 million to leave his job after parent Fujifilm uncovered ‘accounting irregularities’ in its Australasian subsidiaries that had overstated revenues by $450 million, according to a NZ report.
Fujifilm's independent investigative committee’s 75-page finding - just translated - refers to the former managing director of FXNZ and FXA only as “Mr. A.” However, NZ First Party leader, Winston Peters has since named “Mr. A” as Neil Whittaker, who was FXNZ MD from 2004 to 2015, when he took up a similar role at FXA.
The report states that one of the causes of the ‘inappropriate’ accounting practices at FXNZ and FXA was the use of incentives, such as commissions and bonuses, that placed an importance on a corporate culture based on "sales at any cost."
In particular, Mr. A had an extremely high sales target achievement rate, which was particularly emphasised among the assessment items for calculating standard bonuses, and he therefore was paid significant amounts as incentives-based remuneration. It can be inferred that this type of framework caused other employees to seek higher sales and escalated the development of the sales-centric mindset.
According to interviews with multiple persons concerned, FXNZ’s corporate culture was characterized by a “sales at any cost” mindset. The FX group also had expectations for FXNZ’s sales due to sluggish sales growth in Japan, which helped form FXNZ’s sales-centric corporate culture through incentive-based remuneration, and others. Additionally, Mr. A, who was the MD, personally strongly pursued incentive-based remuneration by expanding sales.
The report found that the ‘dysfunctional’ practices later spread to Fuji Xerox Australia.
The circumstances discussed above with dysfunctional organisational governance allowed Mr. A’s sales-centric culture to spread. Like at FXNZ, this was due to the strong expectations to FXAU’s sales under circumstances where sales in Japan were not growing, as well as due to bonuses for achieving targets making up a large proportion of employee compensation (30% of his base pay in the case of Mr. A) as an incentive, of which the portion of sales consideration was big (30%-40% of the bonus). Under this kind of culture, it is believed that inappropriate accounting practices came to be carried out without giving consideration to whether it would contribute to FXAU’s revenue.
Further, Mr. A made organizational changes where the employees from the Commercial Team (whose role was to check whether transactions should be approved in accordance with price decision policies, to cause the Sales Team to comply with rules, report on failures to comply, and review procedures) that was originally part of the Finance Department and employees from the Legal Department were transferred to the Sales Team, which suggests that the organization was changed to weaken the organizational checks and balances on the power of the Sales Team. According to the interviews, there were issues with the capabilities of personnel in the Finance Department, and it seems that the Finance Department functioned weakly, and could not perform its monitoring and checking function properly.
The report says that a decision was made to relieve “Mr. A” of his duties in May 2016.
Mr. A was informed that he was recommended to leave the position on May 16, 2016. He subsequently signed a settlement agreement to leave the firm that paid him the full salary and retirement benefit etc. that he would have received had he stayed with the company for the entire term (AU$1,031,457.62; approx. ¥88 million).
On March 17, 2017, Accounting Firm 2-2 gave notice that it had reason to suspect that fraud had occurred at FXNZ, and that it would be sending official notice (Fraud Letter) on March 20 to FXNZ of its intent to conduct an investigation into the suspected fraud.
The committee’s report "rips the scab off fraud rife at Fuji Xerox NZ," according to Peters.
“Schools, councils and the government have been fleeced by the $500m fraud at Fuji Xerox NZ – with the financial fallout on schools and ratepayers likely to be felt in coming months. It’s a massive fraud right up there with Equiticorp, Goldcorp, Securitibank, South Canterbury Finance and Bridgecorp.
“How could a supposedly loss-making company afford to jet staff off to lush parties in New York, Aspen and Paris and put its managers into cars worth well over six-figures?” says Peters. “How could anyone trust a former boss, ‘Mr. A’ in Fujifilm’s own Independent Investigation, who lauded 'The Wolf of Wall Street' as a hero?”
New Zealand’s Serious Fraud Office is now said to be “obtaining additional information” about the case.