Livedoor tycoon gets jail term for fraud

Posted in Japan | 16-Mar-07 | Author: Norimitsu Onishi| Source: International Herald Tribune

Takafumi Horie, former President of Japanese Internet firm Livedoor, enters the Tokyo District Court on Friday.

TOKYO: Takafumi Horie, the 34-year-old Internet tycoon once heralded as a symbol of new capitalism in Japan, was found guilty Friday morning by the Tokyo District Court of violating securities laws at his company, Livedoor. He was sentenced to two years and six months.

Horie, who had pleaded not guilty and argued that the trial was politically motivated, wil appeal. Prosecutors, who depicted Horie as a greedy and lawless figure who had manipulated the books to inflate his company's stock price, had sought a four-year term.

The six-month trial was closely watched in Japan, not only because Horie was a celebrity, but also because it came to be seen as test of how serious the authorities are about seeking transparency in the stock market and enforcing rules fairly.

Horie's sentence was considered harsh, and could invite criticism that he was singled out while others recently found guilty of similar violations have been let go with much lighter penalties.

Prosecutors had charged Horie and his colleagues with accounting fraud, saying they had falsely reported a pretax profit of more than $40 million in 2004 to hide losses and to bolster Livedoor's share price.

Prosecutors said company executives also set up dummy corporations and spread false information about a takeover of another company by a Livedoor subsidiary.

Other Livedoor executives pleaded guilty to various charges. But Horie maintained his innocence, an unusual move in a country where criminal trials almost always lead to a conviction and where defendants usually plead guilty, whether they are or not, in return for leniency.

Horie insisted the trial was political retaliation for his challenging the Japanese establishment. In his short career, he expanded his company through frequent acquisitions, stock splits and other measures considered aggressive in Japan's clubby business circles. He also made enemies by trying to buy a baseball team and part of a television network, while deriding the Japanese business elite as a "club of old men."

Companies charged with accounting violations far greater than Livedoor's almost never draw indictments. Instead, they are typically dealt with by financial regulators, often leniently, despite stricter enforcement in recent years.

Horie remained combative during his trial, and after testifying he spoke directly to the news media. He rejected the posture of contrition that Japan usually demands of someone in his predicament.

"I called them a club of old men, but that's exactly what they are," Horie said of the Japanese business elite in December. "It's a world of connections, that's it. If you're young, have no connections and you're from a modest family, there's nothing you can do, your whole life."